*

US job openings rebound in August

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Port strike halts half of ocean shipping

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Indexes: Dow down 0.4%, S&P 500 down 0.9%, Nasdaq down

1.5%

(Updates to 4:20 p.m. ET/2020 GMT)

By Caroline Valetkevitch

NEW YORK, Oct 1 (Reuters) - U.S. stocks ended lower,

with the Nasdaq losing more than 1%, on Tuesday as investors

grew more cautious after Iran fired missiles at Israel.

Iran launched the salvo of ballistic missiles in retaliation

for Israel's campaign against Tehran's Hezbollah allies. In

response, U.S. President Joe Biden directed the U.S. military to

aid Israel's defense and shoot down missiles aimed at Israel,

the White House National Security Council said.

While the broader market fell, shares of energy companies

rose along with U.S. oil prices, which settled up 2.4%. Shares

of Exxon Mobil ( XOM ) gained 2.3%.

Defense stocks also rose, including Northrop Grumman ( NOC )

, which rallied 3%, and Lockheed Martin ( LMT ), up 3.6%.

The S&P 500 aerospace and defense index climbed to

a record high. Utilities were up 0.8%.

Airline shares fell, including Delta Air Lines ( DAL ),

which was down 1.6%.

Investors avoided risk following the Middle East news, but

indexes ended off their lows of the day.

"If we do see further escalation I could see continued

market weakness because we just don't know how far this is going

to go," said Peter Tuz, president of Chase Investment Counsel in

Charlottesville, Virginia.

"The level of risk has increased. The markets have had a

good year and people can get scared out of the market depending

on what happens over the next couple of weeks."

The Dow Jones Industrial Average fell 173.18

points, or 0.41%, to 42,156.97, the S&P 500 lost 53.73

points, or 0.93%, at 5,708.75 and the Nasdaq Composite

dropped 278.81 points, or 1.53%, to 17,910.36.

On Monday, the three major U.S. indexes scored strong

gains for September and for the quarter.

CBOE's market volatility index, Wall Street's fear gauge,

rose.

Data released early on Tuesday showed U.S. job openings

rebounded in August, while the Institute for Management Supply's

(ISM) report showed manufacturing activity stood at 47.2 in

September, versus estimates of 47.5.

Investors were also cautious ahead of U.S. jobless claims

data on Thursday and monthly payrolls on Friday.

Traders are pricing in a 38% chance that the Federal Reserve

will lower interest rates by 50 basis points in November, up

from bets of around 35% on Monday but down from 58% a week ago,

CME Group's FedWatch Tool showed.

The U.S. central bank on Sept. 18 cut rates by 50 basis

points, kicking off a new easing cycle.

Investors also monitored a port strike on the East Coast and

the Gulf Coast, halting the flow of about half the nation's

ocean shipping.

The strike that began on Tuesday is not expected to

cause global supply problems as deep or severe as during the

COVID-19 pandemic, but still creates more economic uncertainty

for Fed policymakers to assess.

Declining issues outnumbered advancing ones on the NYSE by a

1.32-to-1 ratio; on Nasdaq, a 2.36-to-1 ratio favored decliners.

The S&P 500 posted 51 new 52-week highs and two new

lows; the Nasdaq Composite recorded 75 new highs and 137 new

lows.

Volume on U.S. exchanges was 13.16 billion shares,

compared with the 11.98 billion average for the full session

over the last 20 trading days.

(Additional reporting by Johann M Cherian and Purvi Agarwal in

Bengaluru; Editing by Maju Samuel and Richard Chang)