Market Volatility Rises As US Stocks Start Holiday-Shortened Week On Downbeat Note

U.S. stock markets closed lower on Tuesday, as investors returned after the Labor Day holiday.

All the three major indices recorded their third weekly loss in a row, as US markets were closed on Monday for the Labor Day holiday.

Traders monitored the economic data, released Tuesday, which showed an unexpected pickup in US services activity for the second straight month in August. The ISM services index climbed to 56.9 in August from previous reading of 56.7.

Upbeat data on the services sector raised prospects that the Federal Reserve will continue increasing rates to combat inflation.

However, the S&P Global services PMI was revised lower to 43.7 in August compared to a preliminary level of 44.1.

Shares of Amazon.com, Inc. AMZN and Microsoft Corporation (MSFT.O) fell by 1.1% each on Tuesday.

The Nasdaq 100 fell 0.72% to close at 12,011.31 on Tuesday, while the S&P 500 fell 0.41%. The Dow Jones declined around 173 points to settle at 31,145.30 in the previous session.

Majority of the sectors on the S&P 500 closed on a lower note, with communication services and energy stocks recording the biggest decline on Tuesday. Real estate sector, however, bucked the overall market trend, gaining around 1% in the previous session.

The Chicago Board Options Exchange's CBOE Volatility Index (VIX) rose 3.5% to close at 26.91 points on Tuesday.

What is CBOE Volatility Index?

The CBOE Volatility Index, popularly known as VIX, is a measure of the equity market's expectation of volatility based on S&P 500 index call and put options.