US stocks experienced declines and bond yields climbed on Monday, primarily driven by a stalemate between the US and Iran which boosted oil prices. This geopolitical tension raised concerns that elevated energy costs could fuel inflation and potentially lead to further interest rate hikes by the Federal Reserve. The S&P 500 erased its gains for the month, and the technology-heavy Nasdaq 100 dropped by about 1.5%. Brent crude futures, at one point, rose as much as 3% to $107.16 a barrel, marking nearly a 20% gain for the month and a nearly 50% increase from before the war started in late February. West Texas Intermediate crude also rose 2.9% to $95.08 a barrel. The dollar strengthened, while gold dipped by 3.9% to $4,118.15 an ounce.
Treasury yields also surged, with the yield on 10-year Treasuries advancing nine basis points to 5.26%, a nearly two-decade high. Yields on 30-year Treasuries rose two basis points to 5.517%, near their highest since 2004. This bond selloff was exacerbated by President Donald Trump's rejection of Iran's latest proposal to reopen the Strait of Hormuz, intensifying inflation concerns. Art Hogan, chief market strategist at B. Riley Wealth, noted that energy has been a consistent upward pressure on inflation, motivating the Fed to consider raising rates. Analysts like Chris Larkin at E*Trade from Morgan Stanley highlighted that the broader market has struggled to gain traction due to rising yields and oil prices.
Amidst the market downturn, some companies saw notable movements. Nvidia Corp. announced a record $150 billion increase in its share buyback plan, reflecting CEO Jensen Huang's confidence in its growth and causing its stock to gain 3.2%. Conversely, software companies saw declines after Meta Platforms Inc. introduced Meta Enterprise Platform, and Meta itself eased nearly 4% after a significant jump last week. Tesla dipped 2.7% following a price target reduction from J.P.Morgan due to weak third-quarter deliveries. Paramount Skydance Corp. was holding investor calls for approximately $44.4 billion equivalent of bonds to fund its acquisition of Warner Bros. Discovery Inc., while Snowflake Inc. planned to raise $3.5 billion from convertible debt.
The ongoing conflict in the Middle East, specifically the unresolved issues surrounding the Strait of Hormuz, remained a central focus for markets. Iran and the US appeared far apart on a new ceasefire deal or the reopening of the vital waterway, with Iran sticking to a proposal President Trump had rejected. Despite Trump's rejection of Iran's offer, he indicated that negotiations were expected to resume this week. The market will be closely watching upcoming labor market data, bond market movements, and oil prices, as earnings season is still weeks away. Analysts suggest that continued selling in bonds due to rising oil prices could further push stocks down.
