The S&P 500 fell 0.58% to close at 7,673.62 on Tuesday as oil prices climbed for a sixth straight day on escalating U.S.-Iran tensions. The Dow Jones Industrial Average tumbled 622 points, its second straight losing session, while investors braced for inflation data due later this week ahead of the Federal Reserve's September meeting.
Oil spike drags stocks lower
The S&P 500 dropped alongside the Dow as West Texas Intermediate futures climbed for a sixth straight day, its longest rally since March, after the U.S. and Iran exchanged strikes over the weekend. Brent crude last hovered around $98 a barrel.
Meanwhile, the Dow tumbled 622 points, or 1.2%, while the Nasdaq Composite finished lower by 0.2%. U.S. markets had been closed Monday for the Labor Day holiday.
Inflation data looms over Fed decision
The jump in energy prices sharpens focus on inflation readings due Thursday and Friday, with the producer price index and consumer price index for August set to shape expectations ahead of the Fed's Sept. 15-16 meeting. Fed funds futures were last pricing in a 60% chance of a quarter-point rate hike, according to CME Group's FedWatch tool.
According to CNBC: "that's going to really make it difficult for them not to hike rates," said Mark Hackett, chief market strategist at Nationwide. He added that investors are focused on that risk right now.
The spike in energy prices 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 to a January 2025 high.
A rare seasonal streak
Earlier in the session, the S&P 500 was on track to mark its 10th straight year of declines in the session after Labor Day, according to Bespoke Investment Group. Bespoke found the index has usually gone on to slide through the rest of September over the past decade, but has typically risen between the post-Labor Day session and year-end.
Semiconductors offered a bright spot Tuesday, helping offset the broader pullback. The VanEck Semiconductor ETF gained 1.5%, while shares of Intel and Advanced Micro Devices surged more than 9% and 6%, respectively.
Source: CNBC
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