U.S. stock markets closed lower on Monday, July 13, driven by a decline in technology and chip stocks, while oil prices surged following renewed tensions in the Middle East between the United States and Iran. The S&P 500 fell 0.8%, the Dow Jones Industrial Average dropped 0.3% (138 points), and the Nasdaq composite sank 1.6%. This comes after a weekend of attacks in the region and President Donald Trump's announcement of reinstating a blockade on Iranian ports, leading to fears of long-term, systemic inflation.
Chip-making companies were particularly hard hit, with Micron Technology falling 4.4% and Nvidia, the largest stock on Wall Street, dropping 3.5%. These declines are attributed to worries that AI-driven stock prices have become inflated and that the demand for AI components may not be sustainable. Meanwhile, the energy sector saw gains due to the rising oil prices.
Brent crude oil, the international standard, climbed 9.6% to $83.30 per barrel, and U.S. crude settled up 9.4% to $78.14 a barrel. This surge was sparked by the conflict in the Strait of Hormuz, a critical passageway for oil tankers, which both the U.S. and Iran claim to control. The increased oil prices and Middle East hostilities have fueled concerns about inflation and the Federal Reserve's monetary policy, leading to a rise in U.S. Treasury yields. The yield on the 10-year Treasury climbed to 4.61% from 4.56% on Friday.
Investors are anticipating a busy week, with Federal Reserve Chair Kevin Warsh scheduled to testify before Congress on July 14 and 15, likely facing questions about the inflationary impact of the U.S.-Iran conflict. Additionally, key economic data releases, including the June Consumer Price Index (CPI), Producer Price Index (PPI), and retail sales data, are expected to provide further insights into inflation trends and consumer spending. Markets are currently pricing in at least one 25-basis-point interest rate hike by the end of the year.
Analysts are projecting aggregate second-quarter S&P 500 earnings growth of 23.7% year-on-year, an increase from 19.2% estimates as of April 1.
