US stocks experienced a downturn on Monday, with the S&P 500 falling 0.77% to 7,683.69, the Nasdaq Composite losing 0.92% to 26,820.38, and the Dow Jones Industrial Average decreasing by 0.67% to 51,481.51. This decline was primarily attributed to escalating oil prices, driven by a stalemate between the US and Iran over the Strait of Hormuz, and surging Treasury yields. The prospect of sustained high energy costs fueled worries about inflation and the potential for more aggressive interest rate hikes from the Federal Reserve, especially after the central bank raised rates by 25 basis points earlier in the month.
Market participants are closely watching upcoming economic data, particularly Wednesday's inflation-adjusted consumer spending figures and Friday's employment report, which are expected to show continued economic strengthening. Economists forecast a 0.5% increase in August's inflation-adjusted personal spending and predict that employers added approximately 90,000 workers in September, with unemployment remaining at 4.1%. These robust economic indicators are bolstering arguments from Fed officials for potentially higher rates, with the CME FedWatch Tool indicating a 70.3% chance of at least a 25-basis-point hike at the October meeting, up from 17.7% a month ago.
The bond market reflected these concerns, with the yield on 10-year Treasuries advancing nine basis points to 5.26%, a nearly two-decade high. Oil prices also climbed, with West Texas Intermediate crude rising 2.9% to $95.08 a barrel, while gold dipped 3.9% to $4,118.15 an ounce. Cryptocurrencies also saw declines, with Bitcoin falling 2% to $82,886.98 and Ether down 0.8% to $2,664.83. Despite the broader market struggles, some tech stocks saw notable movements, with Nvidia Corp. gaining 1.6% after announcing a record $150 billion share repurchase plan, and Generac shares jumping due to an $8 billion Amazon data center supply pact. However, Boeing shares tumbled 6.9% due to a certification delay for its 737 MAX 10, and Tesla slumped 3.9% after a price target cut by J.P.Morgan.
