The Nasdaq Composite and S&P 500 closed lower on Monday as declines in semiconductor stocks pressured markets and investors became less optimistic about a potential agreement to reopen the Strait of Hormuz.
Renewed uncertainty surrounding the Middle East conflict pushed oil prices higher and increased concerns that elevated energy costs could contribute to inflation and influence future Federal Reserve policy decisions.
Oil prices rise as Strait of Hormuz concerns continue
U.S. President Donald Trump called on Iran to provide compensation for people he said were killed during decades of conflicts, attacks, and protests. Iran has also demanded concessions from Washington, including compensation for damage caused by U.S. and Israeli strikes on Iranian territory.
With investors growing less confident about a diplomatic resolution, U.S. crude oil prices jumped approximately 5% to settle at $82.13 per barrel.
Markets are closely watching the Strait of Hormuz, a key global energy route. A reopening of oil flows through the waterway could reduce concerns over higher energy prices, which have contributed to inflation pressures and raised the possibility of higher interest rates from central banks.
Chip stocks weigh on major indexes
Technology and semiconductor stocks were among the biggest drags on the market.
Intel shares fell 4.1% after the chipmaker announced plans to raise approximately $15 billion through a share offering.
Nvidia shares declined 2.9% despite reports that the company is working with financial firms including Apollo Global Management and Blackstone on a potential $500 billion AI infrastructure financing package.
The S&P 500 had reached a record closing high on Friday following stronger-than-expected corporate earnings results.
“It’s record margins and record earnings. That’s just been the story of this market,” said Tom Hainlin, investment strategist at U.S. Bank Wealth Management. However, he noted that uncertainty surrounding the Iran conflict continues to influence investor risk appetite.
Indexes close slightly lower
The S&P 500 declined 0.06% to close at 7,753.12 points.
The Nasdaq Composite fell 0.32% to 26,605.36 points, while the Dow Jones Industrial Average dropped 0.11% to 53,976.04 points.
Despite the decline, market sentiment remained supported by strong earnings performance. According to LSEG data, approximately 85% of the 436 S&P 500 companies that had reported results so far exceeded analyst expectations.
Investors await Fed signals and earnings reports
Upcoming economic data and corporate earnings reports are expected to provide further clues about the Federal Reserve’s monetary policy outlook.
A recent report showing that U.S. employers unexpectedly reduced payrolls by 23,000 jobs in July caused traders to lower expectations for a September rate increase.
According to the CME FedWatch tool, markets are now pricing in a 52% probability of a Federal Reserve rate hike in September.
Investors are also watching upcoming earnings reports from semiconductor equipment maker Applied Materials and networking company Cisco.
Market breadth remains mixed
Declining stocks outnumbered advancing shares on the New York Stock Exchange by a 1.39-to-1 ratio. The exchange recorded 297 new highs and 149 new lows.
On the Nasdaq, 1,928 stocks advanced while 2,841 declined, resulting in a 1.47-to-1 decline ratio.
The S&P 500 recorded 20 new 52-week highs and one new low, while the Nasdaq Composite posted 107 new highs and 74 new lows.
