US stocks experienced a decline on Monday, with the S&P 500 falling 0.76% to 7,685, the Nasdaq 100 dropping 1.08% to 30,277, and the Dow Jones Industrial Average down 0.67% to 51,482. This downturn was largely attributed to surging oil prices, as the Brent crude reached $107.86 a barrel, and rising Treasury yields, with the 10-year Treasury yield advancing seven to nine basis points to 5.23-5.26%. The market's anxiety stemmed from a stalemate in US-Iran talks regarding the Strait of Hormuz, which amplified concerns that elevated energy costs could exacerbate inflation and trigger further Federal Reserve rate hikes. Investors are now pricing in about a 70% probability of a Fed rate hike next month.
The sell-off in the bond market was significant, with the yield on 10-year Treasuries hitting its highest level since mid-2007. Two-year Treasury yields, highly sensitive to rate expectations, jumped 56 basis points in September, marking their largest monthly increase since February 2023. This increase in yields narrowed the discount of 2-year yields to 10-year yields to about 31 basis points, indicating a flattening yield curve. Analysts like Chris Larkin from E*Trade from Morgan Stanley noted that the broader market has struggled due to rising yields and oil prices, while Matt Maley at Miller Tabak emphasized that the focus remains on the bond market, oil prices, and upcoming economic data ahead of earnings season.
Despite the broader market decline, Nvidia, a prominent chip developer, saw some resilience, though it pared earlier gains, after announcing a record $150 billion increase to its share repurchase program, bringing the total program to $235 billion. Conversely, shares of software companies generally fell. Other notable corporate news included Apple being ordered to pay $5.7 billion in a patent case, Boeing identifying a 737 MAX software glitch that could delay certification, and MongoDB announcing a CEO transition as its leader moved to a senior role at Meta Platforms. Snowflake also plans to raise $3.5 billion from convertible debt. Gold dipped by 3.9% to $4,118.15 an ounce, extending its September losses to over 6% due to rising yields diminishing its appeal.
