Key facts
- U.S. stocks declined as crude oil prices surged, reigniting inflation concerns and increasing the probability of a Federal Reserve rate hike.
- The Dow Jones Industrial Average fell 0.57%, the S&P 500 lost 0.36%, and the Nasdaq Composite declined 0.31%.
- Financial markets are pricing in a 65.9% likelihood of a 25-basis-point rate hike at the September Federal Reserve meeting.
- Energy stocks were the largest gainers, while utilities were among the biggest laggards.
- Nvidia and other semiconductor companies saw their shares rise.
U.S. stocks weakened on Monday as a surge in crude oil prices revived inflation fears and increased the likelihood of tighter monetary policy from the Federal Reserve. The Dow Jones Industrial Average fell 0.57%, the S&P 500 lost 0.36%, and the Nasdaq Composite declined 0.31%.
Spiking oil prices dampened investor risk appetite and sent benchmark U.S. Treasury yields higher. Federal Reserve Chair Kevin Warsh's hawkish stance at the Jackson Hole Symposium on Friday, reaffirming inflation targets, also contributed to market sentiment.
Despite the broad sell-off, all three major indexes were on track to post monthly gains. The Nasdaq showed the largest percentage growth for August, driven by the AI trade, while the blue-chip Dow was set for its fifth consecutive monthly advance.
Iran's President Masoud Pezeshkian stated that Tehran is still seeking a negotiated solution to the war. However, increased airstrikes and hostilities, following U.S. President Donald Trump's implementation of economic sanctions, have fueled fears that upward pressure on energy prices could lead to broader inflation, potentially forcing the Fed to hike rates as soon as next month.
Financial markets are currently pricing in a 65.9% likelihood of a 25-basis-point rate hike at the conclusion of September's monetary policy meeting, according to CME's FedWatch tool. Investors are revisiting comments made by Kevin Warsh at Jackson Hole for insights into future interest rate and inflation trajectories.
Among the S&P 500 sectors, energy shares were the biggest gainers, boosted by surging crude prices. Utilities were among the biggest laggards, partly due to an amendment to a California senate bill concerning grid operators' exposure to wildfire liabilities. Halliburton and Valero Energy gained, while California's PG&E slid significantly.
In technology, Nvidia rose 0.9%, and other chipmakers like Sandisk and Qualcomm also saw gains. GameStop's shares increased after the company announced it would use cash on hand to pay about 27% of a previously announced $1.4 billion debt exchange, avoiding further share dilution.