US stocks fell on Monday as investor sentiment was dampened by persistent geopolitical tensions in the Middle East, rising oil prices, and growing inflation worries. The Nasdaq 100 Index declined by 0.8% by 9:55 a.m. in New York, losing ground gained in the previous two sessions. Notable decliners included ARM Holdings Plc, Sandisk Corp., and Datadog Inc. The broader S&P 500 Index also fell by 0.5%. This downturn was partly attributed to a lack of progress in negotiations between Iran and the US regarding a ceasefire deal and the reopening of the Strait of Hormuz, with Tehran reportedly sticking to a proposal rejected by US President Donald Trump.
The stalemate in the Middle East contributed to Brent crude oil prices rising to approximately $107 a barrel, even as Saudi Arabia's primary oil pipeline resumed exports. This increase in oil prices, along with a renewed selloff in US Treasuries, fueled concerns about inflation. Yields on 30-year Treasuries climbed 2 basis points to 5.517%, near their highest level since 2004, while two-year yields saw their largest monthly rise since February 2023, increasing 55 basis points in September. These rising bond yields make borrowing more expensive and can detract from the appeal of equities.
Analysts, like Matt Maley of Miller Tabak, suggested that significant progress on a Middle East deal was unlikely before the midterm elections, especially as long as Iran maintains control over the Strait of Hormuz, which could keep oil price dips short-lived. The Federal Reserve is now seen by markets as having a 68% chance of another rate hike in October, its second consecutive increase, with roughly 90 basis points of tightening priced in by late next year. This hawkish outlook further contributes to the challenging environment for equities.
Among individual stock movements, Nvidia Corp. saw a gain after increasing its share buyback plan by a record $150 billion, bringing its total program to $235 billion. Conversely, MongoDB Inc. experienced a significant plunge after Meta Platforms Inc. appointed MongoDB's president and chief executive officer to lead its new enterprise AI platform. Other decliners included airlines, such as United Airlines and American Airlines, which fell by 3.2% each due to higher fuel costs, and gold miners like Newmont, which sank 3.5% as gold prices fell by 3.1% due to rising yields diminishing the metal's appeal.
