Stocks Finish Mostly Lower as Rising Crude Boosts Bond Yields

The S&P 500 Index ($SPX) (SPY) closed down by -0.33% on Monday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down by -0.70%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +0.08%.  E-mini S&P futures (ESU26) fell -0.28%, and September E-mini Nasdaq futures (NQU26) rose +0.07%.

Stock indices settled mostly lower on Monday, with the Dow Jones Industrial Average falling to a 1-week low on a flare-up in geopolitical risks.  The broader market was under pressure on Monday as renewed Middle East tensions boosted crude oil prices, raised inflation expectations, pushed bond yields higher, and complicated the US inflation outlook. WTI crude oil rose more than +2% on Monday after the US and Iran exchanged strikes for the first time in about a month.  The 10-year T-note yield jumped to a 19-month high of 4.77% on Monday.

Stocks also had some negative carryover from last Friday when Fed Chair Warsh vowed to bring inflation back to target and said financial conditions aren’t restrictive, bolstering the chance of a Fed rate hike next month.  The chance of a Fed interest rate hike at next month’s FOMC meeting rose to 65% on Monday, up from 36% before he spoke last Friday.   

On the positive side, energy producers rose on Monday after crude oil prices rallied and cryptocurrency stocks rose after Bitcoin climbed more than 2%. Cybersecurity stocks also rose on Monday, supporting gains in the Nasdaq 100.

Chinese economic news was mixed after China's Aug manufacturing PMI rose +0.6 to 49.8, stronger than expectations of 49.5.  However, the Aug non-manufacturing PMI was unchanged at 49.0, weaker than expectations of an increase to 49.4.

Oct WTI crude oil prices (CLV26) jumped more than +2% on Monday to a 1-week high as Middle East tensions flared.  The US Central Command said it targeted Iranian rocket launchers preparing to send mines into the Strait of Hormuz, and Iran retaliated by firing missiles and drones at US air bases in Jordan, while the United Arab Emirates said it intercepted drones from Iran.  Crude prices added to their gains on Monday when Axios reported that President Trump is weighing limited strikes against Iran to prevent it from reconstituting its radar and missile capabilities to attack ships in the Strait of Hormuz. 

Q2 earnings results are 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 486 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 65% 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 -1.01%.  China's Shanghai Composite rose to a 1.5-week high and closed up +0.85%.  Japan's Nikkei-225 Stock Average closed down -0.14%.

Interest Rates

September 10-year T-notes (ZNU6) closed down -6.5 ticks on Monday.  The 10-year T-note yield rose +3.6 bp to 4.754%.  T-notes tumbled to a 19-month nearest-futures low on Monday, and the 10-year T-note yield rose to a 19-month high of 4.766%.  T-notes retreated on Monday after the +2% surge in WTI crude oil prices to a 1-week high boosted inflation expectations.  T-notes are also being pressured by negative carryover from last Friday when hawkish comments from Fed Chair Warsh pushed the chances of a Fed rate hike at next month’s FOMC meeting up to 65% on Monday from 36% before he spoke. 

European government bond yields moved higher on Monday.  The 10-year German bund yield jumped to a 15-year high of 3.327% and finished up +4.5 bp to 3.324%.  The 10-year UK gilt did not trade on Monday, with markets in the UK closed for a holiday.

German Aug CPI (EU harmonized) rose +0.2% m/m and +2.9% y/y, weaker than expectations of +0.3% m/m and +3.1% y/y.

Markets are discounting a 99% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Airlines and cruise line operators fell on Monday after WTI crude oil rose more than +2% to a 1-week high, boosting fuel costs and curbing the companies’ profitability.  Carnival (CCL) and Royal Caribbean Cruises (RCL) closed down more than -3%, and United Airlines Holdings (UAL), Delta Air Lines (DAL), Alaska Air Group (ALK), Southwest Airlines (LUV), and Norwegian Cruise Line Holdings (NCLH) closed down more than -2%.   Also, American Airlines Group (AAL) closed down more than -1%.

Housing stocks and building suppliers moved lower on Monday after the 10-year T-note yield rose to a 19-month high, boosting mortgage rates and undercutting housing demand.  DR Horton (DHI), Lennar (LEN), and KB Home (KBH) closed down more than -2%, and Pulte Group (PHM), Toll Brothers (TOL), and Builders Firstsource (BLDR) closed down more than -1%. 

Energy producers and service providers moved higher on Monday after WTI crude oil rose more than +2% to a 1-week high.  SLB Ltd (SLB) closed up more than +4%, and ExxonMobil Holdings (XOM), and Devon Energy (DVN) closed up more than +2%.  Also, Chevron (CVX) closed up more than +2% to lead gainers in the Dow Jones Industrials, and Apa Corp (APA), Diamondback Energy (FANG), Baker Hughes (BKR), ConocoPhillips (COP), Occidental Petroleum (OXY), Halliburton (HAL), Marathon Petroleum (MPC), Phillips 66 (PSX), and Valero Energy (VLO) closed up more than +1%.

Cryptocurrency stocks rose on Monday after Bitcoin (^BTCUSD) jumped more than +2%.  Circle Internet Group (CRCL) closed up more than +9%, and Coinbase Global (COIN) and Galaxy Digital Holdings (GLXY) closed up more than +5%.  Also, Strategy (MSTR) and Iren Ltd (IREN) closed up more than +4%, and MARA Holdings (MARA) closed up +0.66%. 

CrowdStrike Holdings (CRWD) closed up more than +5% to lead gainers in the S&P 500 and Nasdaq 100 and lead cybersecurity stocks higher after announcing a strategic partnership with Clear Secure that integrates the CLEAR1 identity platform with the CrowdStrike Falcon platform.  Also, Okta (OKTA) closed up more than +4%, and Palo Alto Networks (PANW), Zscaler (ZS), Fortinet (FTNT), and SentinelOne (S) closed up more than +2%.  In addition, Cloudflare (NET) closed up more than +1%.

Edison International (EIX) closed down more than -23% to lead losers in the S&P 500, and PG&E Corp (PCG) closed down more than -19% after California lawmakers introduced a bill that would update the state’s wildfire response without shifting liability away from publicly traded utilities. 

Aon Plc (AON) closed down more than -9% on reports that it will acquire KKR & Co’s USI Insurance Services for $17 billion.   

Howmet Aerospace (HWM) closed down more than -7%, and GE Vernova (GEV) closed down more than -1% after Elon Musk said SpaceX and Tesla are each building 100 GW/year of solar production capacity, which will reduce the companies’ reliance on natural-gas-powered turbines.

Pinterest (PINS) closed down more than -6% after announcing CFO Donnelly will step down effective October 30 after three years with the company.

CNH Industrial (CNH) closed up more than +1% after Baird upgraded the stock to outperform from neutral with a price target of $15. 

Science Applications International (SAIC) closed up more than +1% after reporting Q2 revenue of $1.88 billion, better than the consensus of $1.76 billion, and raising its 2027 revenue forecast to $7.2 billion to $7.3 billion from a previous forecast of $7.0 billion to $7.2 billion, stronger than the consensus of $7.19 billion. 

Kaiser Aluminum (KALU) closed up more than +1% after UBS upgraded the stock to buy from neutral with a price target of $184. 

Earnings Reports (9/1/2026)

Credo Technology Group Holding (CRDO), Dell Technologies Inc (DELL), Gitlab Inc (GTLB), Medtronic PLC (MDT), MongoDB Inc (MDB), Palo Alto Networks Inc (PANW).