Stocks Finish Lower as Soaring Crude Prices Spur Inflation Fears

The S&P 500 Index ($SPX) (SPY) closed down -0.06% on Monday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -0.11%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.34%.  September E-mini S&P futures (ESU26) fell -0.07%, and September E-mini Nasdaq futures (NQU26) fell -0.30%.

Stock indices settled lower on Monday.  The broader market was under pressure on Monday from higher crude oil prices, which boosted inflation expectations and T-note yields.  WTI crude oil surged more than +5% on Monday, pushing the 10-year T-note yield up by +5 bp to 4.70%.

Stocks and bonds were also pressured by hawkish comments on Monday from Cleveland Fed President Beth Hammack, who said she is not seeing a problem with the job market and that inflation is not coming down on its own. She added that "now is the time" for us to take action, as the current interest rate is not meaningfully restricting the economy and we would probably need  "some number" of rate hikes to bring down inflation.

Losses in stock indices were limited on Monday by strength in energy providers, software stocks, and cybersecurity companies.  Also, optimism about the sustainability of AI spending is supportive for stocks after Taiwan Semiconductor Manufacturing Co. (TSMC), a bellwether for AI spending that produces the vast majority of the world’s most advanced chips, reported Monday that its July sales rose 45% y/y, a sign of sustained demand for its AI hardware. 

JPMorgan Chase & Co. raised its year-end projection for the S&P 500 to 8,000 from 7,800, saying a strong earnings season and faster AI monetization than expected are boosting profit estimates. 

The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.  So far, earnings results have been positive, with 85% of the 444 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

Sep WTI crude oil prices (CLU26) surged more than +5% on Monday as Iran and Oman remained short of a deal to reopen the Strait of Hormuz.  Iranian Foreign Minister Abbas Araghchi said an agreement with Oman to establish a shipping route through the strait was "very close," but its reopening would require the US to end its blockade of Iranian shipping, withdraw its forces from around Iran, remove sanctions, release frozen assets, and compensate Iran for damages caused by US attacks.  It also demanded a permanent end to attacks on groups it backs in Lebanon, Iraq, Yemen, and Gaza. 

Crude prices raced to their highs Monday afternoon when President Trump spoke out against Iran’s demand for compensation from the war, dimming hopes of a quick deal to reopen the Strait of Hormuz.  In response to Iran’s demand for compensation, President Trump said he will “demand compensation from Iran for people killed and wounded with roadside bombs and many conflicts to people in Lebanon, Syria, Yemen and Gaza over the last 50 years.”  On Sunday, Mr. Trump signaled he's prepared to let economic pressure on Iran build rather than launch additional military strikes, saying the US was only "semi-negotiating" with Iran on the Strait of Hormuz and that the US blockade of Iran was deepening the country's financial woes.

The risk of a renewed flare-up across the Middle East remains high, as another UAE tanker was targeted by a missile on Saturday while transiting the Strait of Hormuz.  Also, on Sunday, Houthi militants in Yemen claimed an attack on Saudi Arabia's Jazan refinery.

The markets are discounting a 52% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets settled higher on Monday.  The Euro Stoxx 50 closed up +0.18%.  China's Shanghai Composite climbed to a 3.5-week high and closed up +0.672%.  Japan's Nikkei-225 Stock Average rallied to a 2-week high and closed up sharply by +2.08%.

Interest Rates

September 10-year T-notes (ZNU6) closed down -8.5 ticks on Monday.  The 10-year T-note yield rose +5.4 bp to 4.699%.  T-notes were under pressure on Monday from a more than +5% surge in WTI crude oil prices, which boosted inflation expectations.  Also, hawkish comments from Cleveland Fed President Beth Hammack undercut T-note prices when she said the current interest rate is not meaningfully restricting the economy, and we would probably need "some number" of rate hikes to bring inflation down.  In addition, supply pressures weighed on T-notes as the Treasury will auction $125 billion of T-notes and T-bonds this week, beginning with a $58 billion auction of 3-year T-notes on Tuesday. 

European government bond yields moved higher on Monday.  The 10-year German bund yield climbed to a 1-week high of 3.182% and finished up +4.6 bp to 3.179%.  The 10-year UK gilt yield rose +6.7 bp to 4.989%.

The Eurozone Aug Sentix investor confidence index rose +4.0 to a 6-month high of 0.9, stronger than expectations of -0.5. 

Markets are discounting a 90% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Chipmakers moved lower on Monday, weighing on the broader market.  ARM Holdings (ARM) closed down more than -5%, and Marvel Technology (MRVL) closed down more than -4%.  Also, Microchip Technology (MCHP), Qualcomm (QCOM), and  Applied Materials (AMAT) closed down more than -3%, and Nvidia (NVDA) closed down more than -2% to lead losers in the Dow Jones Industrials.  In addition, Advanced Micro Devices (AMD), KLA Corp (KLAC), and NXP Semiconductors (NXPI) closed down more than -2%, and Micron Technology (MU), Analog Devices (ADI), Lam Research (LRCX), and Texas Instruments (TXN) closed down more than -1%.

Airline stocks and cruise line operators retreated on Monday after WTI crude oil soared more than +5%. Alaska Air Group (ALK) closed down more than -5%, and American Airlines Group (AAL) and Southwest Airlines (LUV) closed down more than -4%.  Also, United Airlines Holdings (UAL), Carnival (CCL), Royal Caribbean Cruises (RCL), and Norwegian Cruise Line Holdings (NCLH) closed down more than -3%.  In addition, Delta Air Lines (DAL) closed down more than -1%.

Homebuilders and building supply companies were under pressure on Monday after the 10-year T-note yield rose +5 bp, which boosts mortgage rates and is negative for housing demand.  KB Home (KBH), Toll Brothers (TOL), and Builders Firstsource (BLDR) closed down more than -3%.  Also, DR Horton (DHI), Pulte Group (PHM), and Lennar (LEN) closed down more than -2%, and Home Depot (HD) closed down more than -1%. 

Software companies rallied on Monday, providing support to the overall market.  Datadog (DDOG) closed up more than +11% to lead gainers in the S&P 500 and Nasdaq 100. Also, Autodesk (ADSK), Adobe Systems (ADBE), Salesforce (CRM), Intuit (INTU), Thomson Reuters Corp (TRI), Workday (WDAY), and Oracle (ORCL) closed up more than +2%.  In addition, Palantir Technologies (PLTR) and Microsoft (MSFT) closed up more than +1%. 

Energy stocks and service providers moved sharply higher on Monday as the price of WTI crude oil surged more than +5%.  APA Corp (APA) closed up more than +9%, and Marathon Petroleum (MPC) closed up more than +7%.  Also, Devon Energy (DVN), Diamondback Energy (FANG), Haliburton (HAL), SLB Ltd (SLB), Phillips 66 (PSX), and Valero Energy (VLO) closed up more than +5%, and Chevron (CVX) closed up more than +4% to lead gainers in the Dow Jones Industrials. In addition, Baker Hughes (BKR), Occidental Petroleum (OXY), ExxonMobil Holdings (XOM), and ConocoPhillips (COP) closed up more than +4%.

Cybersecurity stocks moved higher on Monday to provide support for the broader market. CrowdStrike Holdings (CRWD) and Palo Alto Networks (PANW) closed up more than +5%, and Zscaler (ZS) closed up more than +4%.  Also, Cloudflare (NET) closed up more than +3%, Fortinet (FTNT) closed up more than +2%, and Okta (OKTA) closed up more than +1%. 

Intel (INTC) closed down more than -4% after announcing its intention to offer $15 billion in common stock.

Monday.com (MNDY) closed down more than -4% after forecasting Q3 revenue of $370 million, weaker than the consensus of $372.8 million. 

Trade Desk (TTD) closed down more than -2%, adding to last Friday’s -22% plunge, after reporting weaker-than-expected Q2 and forecasting Q3 revenue below consensus. 

Samsara (IOT) closed down more than -2% after Piper Sandler downgraded the stock to neutral from overweight with a price target of $40. 

Varex Imaging Corporation (VREX) closed up more than +48% after Teledyne Technologies agreed to acquire the company for $1.1 billion or $18.90 per share. 

RadNet (RDNT) closed up more than +6% after raising its full-year Imaging Center revenue estimate to $2.37 billion to $2.42 billion from a previous estimate of $2.36 billion to $2.41 billion. 

Hewlett Packard Enterprise (HPE) closed up more than +2% after Morgan Stanley upgraded the stock to overweight from neutral with a price target of $69. 

Earnings Reports (8/11/2026)

Aramark (ARMK), Cardinal Health Inc (CAH), Cava Group Inc (CAVA), CoreWeave Inc (CRWV), H&R Block Inc (HRB), Lumentum Holdings Inc (LITE), Middleby Corp/The (MIDD), On Holding AG (ONON), Smithfield Foods Inc (SFD), Super Micro Computer Inc (SMCI).