The Dow Jones Industrial Average dropped more than 600 points Tuesday as oil prices extended a multi-day rally tied to Middle East tensions. The S&P 500 and Nasdaq Composite also fell, with investors now watching August inflation data due later in the week ahead of the Federal Reserve's next meeting.
The Dow Jones Industrial Average tumbled 622 points, or 1.2% on Tuesday, the first trading day after the Labor Day holiday. The S&P 500 fell 0.4%, while the Nasdaq Composite dipped 0.2%.
Oil's Rally Deepens the Selloff
West Texas Intermediate futures climbed for a sixth straight day, their longest rally since a seven-day streak in March, after the U.S. and Iran exchanged strikes over the weekend. Brent crude last hovered around $98 a barrel. Energy stocks jumped while software lagged on the session, Investor's Business Daily reported. Operations at certain energy facilities in Saudi Arabia had been halted after Yemen's Iran-aligned Houthis wounded 73 people in an attack there.
A Test for the Fed
Inflation is back at the center of investor attention this week. The spike in energy prices sharpens focus on the producer price index and consumer price index for August, due Thursday and Friday, respectively. Fed funds futures were last pricing a 58% chance of a quarter-point rate hike after the central bank's Sept. 15-16 meeting, according to the CME Group's FedWatch tool.
Yields and Trade Tensions Add to the Pressure
Rising energy costs also pushed Treasury yields higher. The benchmark 10-year Treasury note yield last week climbed to its highest level since November 2023, while the 2-year note yield scaled a January 2025 high. Traders are also weighing renewed U.S.-Canada trade tension, after retaliatory tariffs on about $20 billion of U.S. goods took effect Tuesday. President Trump said Canadian planemaker Bombardier can't keep selling in the U.S. unless it builds products there.
Sources: CNBC, Investor's Business Daily
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