U.S. stocks declined on Monday as investors assessed rising oil prices, higher Treasury yields and uncertainty surrounding a possible peace agreement involving Iran.
The market reaction came as investors evaluated how continued energy price increases could affect inflation and influence the Federal Reserve’s future interest rate decisions.
Crude oil prices initially climbed after President Donald Trump rejected a proposed peace agreement from Iran, although prices later eased as expectations grew that diplomatic talks could continue through Qatari mediation.
Oil Prices Renew Inflation Concerns
Oil prices had moved lower earlier in the month as markets anticipated possible progress toward a peace agreement. However, those expectations have weakened in recent days, pushing crude prices higher again.
Rising crude oil and diesel prices have increased concerns that inflation could remain elevated. Higher inflation expectations have also contributed to rising U.S. Treasury yields.
Investors are closely watching Federal Reserve policy after the central bank increased interest rates by 25 basis points earlier in the month and officials indicated that additional increases could be possible if inflation pressures persist.
“Iran is driving oil prices, and oil prices are driving inflation, and inflation is driving interest rates,” said Jack Ablin, chief investment strategist at Cresset Capital Management.
Major US Stock Indexes Move Lower
The three major U.S. stock indexes ended the session lower:
- Dow Jones Industrial Average: fell 347.11 points, or 0.67%, to 51,481.51.
- S&P 500: declined 59.72 points, or 0.77%, to 7,683.69.
- Nasdaq Composite: dropped 248.34 points, or 0.92%, to 26,820.38.
The S&P 500 recorded its largest daily percentage decline since August 20.
Boeing Shares Decline While Nvidia Gains
Boeing shares were among the biggest losers on the Dow, falling 6.9% after the Federal Aviation Administration delayed certification of the company’s 737 MAX 10 due to a newly identified software issue.
Nvidia moved against the broader market trend, gaining 1.6% after announcing a $150 billion share repurchase authorization, the largest buyback program in the company’s history.
Markets Watch Fed Rate Outlook
Federal Reserve Governor Lisa Cook said inflation pressures could continue in the coming months due to factors including artificial intelligence-related demand and higher oil prices.
Markets have increased expectations for another Federal Reserve rate hike at the October meeting. According to CME FedWatch data, investors are pricing in a 70.3% probability of at least a 25-basis-point increase, compared with 57.6% one week earlier.
Investors are also looking ahead to several important economic reports this week, including inflation data and labor market indicators, which could provide additional signals about the Fed’s next steps.
Tesla Shares Fall After Price Target Cut
Tesla shares dropped 3.9% after JPMorgan lowered its price target for the electric vehicle company, citing weaker-than-expected third-quarter deliveries.
Overall market breadth remained negative, with declining stocks significantly outnumbering advancing shares on both the New York Stock Exchange and Nasdaq.
The S&P 500 recorded four new 52-week highs and 29 new lows, while the Nasdaq Composite posted 40 new highs and 249 new lows.
