The S&P 500 Index ($SPX) (SPY) closed down by -0.52% on Monday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down by -0.51%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -0.17%. E-mini S&P futures (ESU26) fell -0.48%, and September E-mini Nasdaq futures (NQU26) fell -0.17%.
Stock indices settled lower on Monday, with the Dow Jones Industrials falling to a 2-week low. The prospects for the US-Iran war to continue boosted crude oil prices to a 3-week high and weighed on market sentiment on Monday after President Trump said he’s not interested in extending the expiring 60-day truce with Iran. The jump in crude oil prices also boosted inflation expectations and bond yields, bearish factors for stocks. The 10-year T-note yield rose +3 bp to 4.72%.
Stocks initially found support on Monday amid strength in technology stocks after stellar revenue growth at Anthropic PBC bolstered the view that spending on artificial intelligence will be sustained. Anthropic told prospective investors that its Q2 revenue jumped by at least 14-fold from the same period last year, according to a report today by Bloomberg. However, the weakness in software stocks is weighing on the Dow Jones Industrial Average.
Stocks also found support on some better-than-expected US economic news. The Aug Empire manufacturing survey general business conditions index unexpectedly rose +5.0 to a 4.5-year high of 20.6, stronger than expectations of a decline to 10.0. Also, the Aug NAHB housing market index unexpectedly rose +1 to 35, stronger than expectations of a decline to 33.
Signs of weakness in China’s economy undercut global growth prospects and were negative for stocks. China's July industrial production rose +4.5% y/y, weaker than expectations of +5.0% y/y. Also, China's July retail sales rose +0.6% y/y, weaker than expectations of +1.5% y/y. In addition, the China July survey jobless rate rose +0.2 to 5.2%, showing a weaker labor market than expectations of 5.1%. Finally, China's July new home prices fell -0.18% m/m, the thirty-eighth consecutive month home prices have declined.
Sep WTI crude oil prices (CLU26) rallied more than +2% on Monday to a 3-week high amid fresh Israeli attacks on Iran-backed Hezbollah in Lebanon, dampening the prospects of ending hostilities in the Middle East and a quick reopening of the Strait of Hormuz. Also, Israel has struck Iran-backed Hamas in Gaza, the Yemen- based Houthis have attacked ships in the Red Sea, and several vessels have been hit by projectiles in the Strait of Hormuz. President Trump said today that the US naval blockade on Iranian ports is putting pressure on the country, and he has no timeline for resolving the US-Iran conflict.
Crude prices raced to their high on Monday after US Energy Secretary Chris Wright said that the US is playing the long game with Iran, implying the US has no plans for de-escalation of the conflict, potentially limiting crude supplied from the Middle East.
Iran and Oman appear to be edging closer to a deal on how the Strait of Hormuz should be managed, agreeing on routes through the waterway. Iranian Foreign Ministry spokesman Baghaei said on Monday that finalizing a "shipping map" is part of a broader accord to govern traffic through the strait and constitutes an independent arrangement between the two states that will uphold their sovereignty and ensure the safe transit of vessels.
Treasury Secretary Bessent said last week that the administration will soon announce unprecedented economic measures against Iran that “have never been seen in the history of economic isolation of a country.” The economic measures would add to the current US naval blockade of Iranian ports.
There have been no signs of progress toward a US-Iran agreement to fully open the Strait of Hormuz. An Iranian military spokesperson said last Thursday that no ship can safely pass the Strait of Hormuz without Iran’s authorization and supervision and that President Trump’s claims of control over the Strait are “nothing more than lies.” The Iranian statement was in response to President Trump's comment last Tuesday that the US has “total control over the Hormuz Strait” and that “we own it.”
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 456 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data.
The markets are discounting a 36% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.
Overseas stock markets settled mixed on Monday. The Euro Stoxx 50 closed down -0.14%. China's Shanghai Composite climbed to a 5-week high and closed up +1.41%. Japan's Nikkei-225 Stock Average closed up +0.74%.
Interest Rates
September 10-year T-notes (ZNU6) closed down -4 ticks on Monday. The 10-year T-note yield rose up +3.2 bp to 4.724%. T-notes came under pressure on Monday after WTI crude oil prices rose more than +2% to a 3-week high, which boosted inflation expectations. The 10-year breakeven inflation rate rose to a 3-week high of 2.296% on Monday. Also, Monday’s stronger-than-expected US economic news on the Aug Empire manufacturing index and Aug NAHB housing market index weighed on T-note prices.
European government bond yields moved higher on Monday. The 10-year German bund yield rose to a 15-year high of 3.223% and finished up +1.7 bp to 3.221%. The 10-year UK gilt yield climbed to a 3-week high of 5.063% and finished up +2.3 bp to 5.060%.
Markets are discounting a 94% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.
US Stock Movers
Software stocks retreated on Monday, pressuring the overall market. Thomson Reuters (TRI) closed down more than -4% to lead losers in the Nasdaq 100, and ServiceNow (NOW) closed down more than -4%. Also, Adobe Systems (ADBE), Datadog (DDOG), Workday (WDAY), and Microsoft (MSFT) closed down more than -3%. In addition, Atlassian Corp (TEAM), Autodesk (ADSK), Intuit (INTU), Oracle (ORCL), and Salesforce (CRM) closed down more than -2%.
Airlines and cruise line operators fell on Monday after WTI crude oil rose more than +2% to a 3-week high. Alaska Air Group (ALK) and Norwegian Cruise Line Holdings (NCLH) closed down more than -4%, and American Airlines Group (AAL), United Airlines Holdings (UAL), and Southwest Airlines (LUV) closed down more than -2%. Also, Delta Air Lines (DAL), Carnival (CCL), and Royal Caribbean Cruises (RCL) closed down more than -1%.
Chipmakers and AI-infrastructure stocks moved higher on Monday, a supportive factor for the broader market. The iShares Semiconductor ETF (SOXX) closed up more than +1%. Sandisk (SNDK) closed up more than +8% to lead gainers in the S&P 500 and Nasdaq 100, and Western Digital (WDC), Applied Materials (AMAT), and Marvell Technology (MRVL) closed up more than +5%. Also, Micron Technology (MU) closed up more than +4%, and Lam Research (LRCX) closed up more than +3%. In addition, Seagate Technology Holdings Plc (STX) and ASML Holding NV (ASML) closed up more than +2%, and Microchip Technology (MCHP), KLA Corp (KLAC), and Texas Instruments (TXN) closed up more than +1%.
Energy producers and service providers rose on Monday after WTI crude rallied more than +2% to a 3-week high. Devon Energy (DVN) closed up more than +3%, and APA Corp (APA) and Phillips 66 (PSX) closed up more than +2%. Also, Chevron (CVX), Diamondback Energy (FANG), Occidental Petroleum (OXY), and Valero Energy (VLO) closed up more than +1%.
EyePoint (EYPT) closed down more than -66% after saying its experimental treatment for an eye disease failed to meet its primary goal in a late-stage trial.
Constellation Brands (STZ) closed down more than -6% after Berkshire Hathaway announced that it liquidated its holdings in the company.
L3Haris Technologies (LHX) closed down more than -4% after saying that Christopher Kubasik stepped down as CEO and chairman of the board, effective immediately.
SentinelOne (S) and Netskope (NTSK) closed down more than -3% after Deutsche Bank downgraded the stocks from buy to hold.
Onto Innovation (ONTO) closed up more than +5% after Goldman Sachs initiated a buy rating on the stock and a price target of $400.
Pulse Biosciences (PLSE) closed up more than +5% after Needham & Co. initiated coverage on the stock with a buy recommendation and a $58 price target.
Earnings Reports (8/18/2026)
Amer Sports Inc (AS), Home Depot Inc/The (HD), Jack Henry & Associates Inc (JKHY), Keysight Technologies Inc (KEYS), Toll Brothers Inc (TOL).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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