The Dow dropped about 450 points shortly after the opening bell but has since rebounded. In recent trading it was down around 200 points, or 0.5%. The S&P 500 and Nasdaq also bounced back from early losses.
The turbulence comes after Moscow changed its nuclear doctrine following the Biden administration giving Ukraine permission to use longer-range weapons inside targets in Russia.
"Today is a reflection of concern that, after 1,000 days, the Russia-Ukraine conflict looks like it's getting hotter," said Art Hogan, chief market strategist at B. Riley Wealth Management.
Not only did US stocks fall, but investors piled into safe havens like gold and US debt. Gold prices increased on Tuesday and US Treasury rates dipped.
READ ALSO | Russia claims it shot down US-made ATACMS missiles, issues nuclear threat
Ukraine fired US-made ATACMS missiles into Russia's Bryansk region, Russia's Defense Ministry said Tuesday, in a major escalation.
The attack comes just two days after the Biden administration gave Kyiv the green light to use the longer-range American weapons against targets inside Russia. On Sunday, President Joe Biden authorized Ukraine to use the longer-range missiles inside Russia, ending a monthslong prohibition aimed to avoid drastically escalating the conflict.
Oil prices, which surged at the start of the Russia-Ukraine war in 2022, were little changed Tuesday morning.
"In our view, the underlying trends for the equity market remain positive, but this news provides an excuse for the market to give back some of its rally," said Keith Lerner, chief market strategist at Truist Advisory Services.
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