Stocks Settle Higher as Lower Crude Prices Ease Inflation Risks

The S&P 500 Index ($SPX) (SPY) closed up by +0.32% on Tuesday, the Dow Jones Industrial Average ($DOWI) (DIA) closed up by +0.30%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +0.64%.  E-mini S&P futures (ESU26) rose +0.30%, and September E-mini Nasdaq futures (NQU26) rose +0.63%.

Stock indices settled higher on Tuesday, supported by weakness in crude oil prices, which sent bond yields lower.  WTI crude oil fell more than -3% on Tuesday, easing inflation expectations and knocking the 10-year T-note yield down by -6 bp to 4.64%.  Crude prices tumbled on Tuesday on a news report that the US would be returning diplomats to Middle East embassies, easing concerns about an escalation of the Iran war.  Chipmakers and AI-infrastructure stocks also moved higher on Tuesday, lifting the broader market.  Short covering emerged in chipmakers ahead of Nvidia’s quarterly earnings results after the close on Wednesday. 

Stocks fell from their best levels on Tuesday amid weaker-than-expected US economic news, including a fall in new home sales to a 6-month low and a drop in consumer confidence to a 7-month low.  Weakness in energy producers and software stocks also limited gains in the broader market.

The US June S&P Composite-20 Home Price Index rose +2.1% y/y, stronger than expectations of +1.8% y/y and the largest year-over-year increase in a year.

US July new home sales fell -10.5% m/m to a 6-month low of 607,000, weaker than expectations of 620,000.

The US July Richmond Fed manufacturing survey of current conditions unexpectedly fell -1 to 4, weaker than expectations of an increase to 7.

The Conference Board US Aug consumer confidence index fell -0.8 to a 7-month low of 89.4, weaker than expectations of 90.2.

Hawkish comments on Tuesday from Boston Fed President Susan Collins were negative for stocks and bonds as she said, "Maintaining the current federal funds rate target range will require continued evidence that inflation is indeed coming down, and should evidence of sustained inflation progress not materialize, I believe it will be appropriate to tighten policy soon."

Oct WTI crude oil prices (CLV26) fell more than -3% on Tuesday to a 1-week low after The New York Times reported the US State Department is preparing to send US diplomats back to embassies in the Middle East that were evacuated before and during the war with Iran, suggesting that the Trump administration does not anticipate a return to all-out hostilities with Iran.

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 86% of the 468 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 39% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets settled higher on Tuesday.  The Euro Stoxx 50 closed up +0.12%.  China's Shanghai Composite recovered from a 2.5-week low and closed up +0.19%.  Japan's Nikkei-225 Stock Average recovered from a 2.5-week low and closed up +0.50%.

Interest Rates

September 10-year T-notes (ZNU6) closed up by +13 ticks on Tuesday.  The 10-year T-note yield fell -5.9 bp to 4.637%.  T-notes rallied on Tuesday amid the -3% plunge in WTI crude oil prices, which eased inflation expectations.  T-notes also have carryover support from Monday when CNBC reported that the Treasury could use the Treasury General Account, which had a balance of $935 billion on August 20, to fund expanded buybacks of higher-yielding, older government securities.  T-notes added to their gains after Tuesday’s weaker-than-expected reports on July new home sales and Aug consumer confidence.

On the negative side for T-notes were hawkish comments from Boston Fed President Collins, who said it will be appropriate for the Fed to raise interest rates soon if evidence of sustained inflation progress does not materialize. Also, tepid demand for the Treasury’s $69 billion auction of 2-year T-notes was bearish for T-notes as the auction had a bid-to-cover of 2.60, below the 10-auction average of 2.62.  

European government bond yields moved lower on Tuesday.  The 10-year German bund yield fell to a 1-week low of 3.195% and finished down -5.1 bp to 3.201%.  The 10-year UK gilt yield dropped to a 1-week low of 4.981% and finished down -6.9 bp to 4.988%.

The German Aug IFO business climate survey rose +2.1 to a 1-year high of 88.8, stronger than expectations of 87.2.

German Q2 GDP was revised upward to +0.3% q/q and +1.0% y/y from the previously reported +0.2% q/q and +0.9% y/y.

Markets are discounting a 95% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Chipmakers and AI-infrastructure stocks moved higher on Tuesday, supporting gains in the broader market.  Marvell Technology (MRVL) and Advanced Micro Devices (AMD) closed up more than +4%, and Seagate Technology Holdings Plc (STX) closed up more than +3%.  Also, Western Digital (WDC) closed up more than +2%, and Nvidia (NVDA), Micron Technology (MU), ARM Holdings Plc (ARM), and Lam Research (LRCX) closed up more than +1%.

Cryptocurrency-exposed stocks rallied on Tuesday after Bitcoin (^BTCUSD) posted a 3.25-month high.  Galaxy Digital Holdings (GLXY) closed up more than +8%, and MARA Holdings (MARA) and Riot Platforms (RIOT) closed up more than +6%.  Also, Circle Internet Group (CRCL) closed up more than +4%, and Coinbase Global (COIN) and Strategy (MSTR) closed up more than +3%.

Energy producers and service providers retreated on Tuesday as WTI crude oil fell more than -3% to a 1-week low.  APA Corp (APA) closed down more than -3%, and Devon Energy (DVN), Diamondback Energy (FANG), Halliburton (HAL), Phillips 66 (PSX), Marathon Petroleum (MPC), and Occidental Petroleum (OXY) closed down more than -2%.  Also, Chevron (CVX), ConocoPhillips (COP), ExxonMobil Holding (XOM), Slb Limited (SLB), and Valero Energy (VLO) closed down more than -1%.

Software stocks fell on Tuesday, limiting the upside in the overall market. Thomson Reuters Corp (TRI) closed down more than -3% to lead losers in the Nasdaq 100, and Intuit (INTU) also closed down more than -3%.  Also, Atlassian Corp (TEAM) and Workday (WDAY) closed down more than -2%, and Autodesk (ADSK), Datadog (DDOG), Palantir Technologies (PLTR), and Salesforce (CRM) closed down more than -1%. 

Moderna (MRNA) closed up more than +14% to lead gainers in the S&P 500 after Wolfe Research upgraded the stock to peer perform from underperform 

Madison Air Solutions Corp (MAIR) closed up more than +12% after announcing a private placement of approximately $2.25 billion of the company’s class A common stock. 

Bread Financial Holdings (BFH) closed up more than +2% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $130.

Sherwin-Williams (SHW) closed up more than +1% after DA Davidson & Co initiated coverage on the stock with a buy recommendation and a price target of $400.

Dicks Sporting Goods (DKS) closed down more than -30% after reporting Q2 net sales of $5.59 billion, weaker than the consensus of $5.65 billion, and cutting its 2027 net sales forecast to $21.9 billion to $22.2 billion from a previous estimate of $22.1 billion to $22.4 billion. Other apparel stocks also came under pressure after Dick’s cut its guidance, with Lululemon Athletica (LULU), Kohl’s (KSS), Deckers Outdoors (DECK), and Abercrombie & Fitch (ANF) closing down more than -3%.

Target (TGT) closed down more than -3% after the company removed a Halloween clown costume that critics said evoked blackface imagery, which sparked an apology from the company. 

Earnings Reports (8/26/2026)

Agilent Technologies Inc (A), Bath & Body Works Inc (BBWI), CrowdStrike Holdings Inc (CRWD), Donaldson Co Inc (DCI), Dycom Industries Inc (DY), Everpure Inc (P), HP Inc (HPQ), J M Smucker Co/The (SJM), Nutanix Inc (NTNX), NVIDIA Corp (NVDA), Okta Inc (OKTA), Salesforce Inc (CRM), Synopsys Inc (SNPS), Veeva Systems Inc (VEEV), Williams-Sonoma Inc (WSM).