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Financial Markets 08/31 15:22
Oil prices rose and U.S. stocks fell after American forces struck Iranian
rocket launchers on the Strait of Hormuz, marking the first military action in
a month. Brent crude rose 2.7% Monday, closing back above $90 a barrel. The S&P
500 fell 0.3%, the Dow Jones Industrial Average dropped 374 points, or 0.7%,
and the Nasdaq slipped 0.1%. Still, all three indexes closed with gains for the
month of August. The yield on the 10-year Treasury rose to 4.75%, around the
level seen two weeks ago when the Trump administration took the unusual step of
announcing it would intervene in the bond market.
THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.
The price of oil rose and stocks fell on Wall Street Monday after the U.S.
launched its first military action in a month against Iran.
The S&P 500 index fell 0.5%. The Dow Jones Industrial Average fell 331
points, or 0.6%, as of 3:01 p.m. Eastern time. The Nasdaq fell 0.4%.
The indexes are on pace to close out August with a gain for the month after
the S&P 500 and Nasdaq each lost ground in July and June.
Monday's losses were broad, with nearly every sector within the benchmark
S&P 500 in the red. Energy stocks, though, gained ground. Exxon Mobil rose 2.1%
and Chevron rose 1.5%.
On the losing side, Edison International slumped 23.4% and PG&E fell 19.5%
for two of the steepest declines. That followed reports about potential
California wildfire legislation that would allow insurers to sue utilities over
related claims.
Amazon fell 2.9% after The Wall Street Journal reported that the Federal
Trade Commission and more than 20 states are preparing to sue Amazon.com over
claims the online retail giant manipulated prices on its platform.
The U.S. war with Iran remained a key focus for Wall Street. U.S. forces
struck Iranian rocket launchers on the Strait of Hormuz on Sunday. Meanwhile,
the United Arab Emirates said it intercepted an Iranian drone over its waters
on Monday.
The aggressive actions follow a lull in activity in the U.S. war with Iran,
which has lasted more than six months.
The war has curtailed traffic in the Strait of Hormuz, which accounts for
about 20% of the world's oil shipments. Oil prices remain high after an initial
surge earlier in the war and that has made everything from gasoline to shipped
goods more expensive.
The price of Brent crude, the international standard, rose 2.7% to settle at
$90.49 per barrel on Monday. The price swung between $72 and $102 last month
amid rising and falling hopes for a deal to end the war.
The national average for gasoline in August has been above $4 per gallon
every day of the month for the first time ever, according to the AAA. It has
been the most expensive August at the pump on record, outpacing even the
enormous supply chain crunch during the COVID-19 pandemic in 2022.
Higher energy prices because of the war have fueled already stubbornly high
inflation. That has been weighing on household spending and consumer
confidence. It has also given the Federal Reserve a more complicated path ahead
for its interest rate policy.
The rate of inflation remains well above 3%, which is far beyond the Fed's
2% target. Wall Street expects the central bank to raise interest rates at
least once before the year ends in an effort to cool inflation. On Friday, Fed
Chair Kevin Warsh said that inflation is still too high and suggested a rate
hike might be necessary in the coming months.
The Fed gets its next inflation update on Sept. 11, just days ahead of its
next meeting to determine interest rate policy. Wall Street is forecasting a
66% chance that the Fed will raise its benchmark rate at that meeting,
according to CME FedWatch.
"While a September hike is not a foregone conclusion, we expect the Fed to
have limited tolerance for meaningful upside inflation surprises," wrote Brock
Weimer, investment strategy analyst at Edward Jones, in a research note.
The yield on the two-year Treasury, which closely tracks expectations about
Fed moves, rose to 4.35% from 4.34% late Friday. That's up significantly from
about 3.50% at the beginning of 2026.
The yield on the 10-year Treasury rose to 4.76% from 4.73% late Friday.
That's back up around the level seen two weeks ago when the Trump
administration took the unusual step of announcing it would intervene in the
bond market.
The job market remains resilient, but is showing signs of weakening. Any
increase to interest rates that could cool inflation also risks hurting the
jobs market.
Later this week, the U.S. reports August jobs data. In July, the U.S. job
market stalled unexpectedly as employers cut 23,000 jobs. Labor Department
revisions slashed another 103,000 jobs from May and June payrolls.
Company updates helped move several stocks Monday. GameStop rose 2.5% after
the video game retailer provided a preliminary second-quarter earnings outlook
above its year-ago results. Shares of Aon slid 8.6% as the company announced
that it was buying insurance broker USI Insurance Services from private equity
firm KKR in a deal valued at $17 billion, including debt.
Markets were mixed in Europe and Asia.
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AP Business Writers Elaine Kurtenbach and Michelle Chapman contributed to
this report.
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