S&P 500 futures fell 0.4% Tuesday as escalating Middle East conflict pushed oil to six-week highs and Canada's retaliatory tariffs on U.S. goods took effect. Dow futures dropped 491 points and Treasury yields climbed as traders awaited this week's inflation data and next week's Fed decision.
S&P 500 futures were off 0.4% Tuesday, the first trading day after Labor Day, as oil prices jumped to six-week highs and Canada's retaliatory tariffs on American goods took effect. Dow Jones Industrial Average futures fell 491 points, or 0.9%, and Nasdaq-100 futures slipped 0.2%.
Oil jumps after Houthi strike on Saudi energy sites
Brent crude futures rose 2.3% to $99.22 per barrel after Iran-backed Houthi militants struck energy infrastructure in Saudi Arabia. West Texas Intermediate futures climbed 3.3% to $94.54, gaining ground for a third consecutive session. Traders worry the sustained rise in energy prices will accelerate inflation.
The 10-year U.S. Treasury yield moved back above 4.8% Tuesday as energy-price anxiety weighed on bonds. The 10-year yield last week notched its loftiest reading since November 2023, and the 2-year note touched a multi-year peak last seen in January 2025.
Fed decision and inflation prints loom
Dan Coatsworth, head of markets at AJ Bell, said apparent moves toward a deal between Iran and Oman to manage shipping through the Strait of Hormuz were highlighting Tehran's control of the waterway. He added that investors would watch U.S. inflation data due later this week to gauge whether rising energy prices are feeding into broader price pressures.
The Federal Reserve holds a policy meeting next week, and traders see a 60% probability that it will lift rates by a quarter-percentage point, according to CME Group's FedWatch tool. Wholesale inflation data is due Thursday, and August consumer price index figures are expected Friday, with economists forecasting headline inflation held at an annual rate of 3.4%.
Canada tariffs and Bombardier threat add pressure
Canada's retaliatory levies of as much as 50% on select U.S. products kicked in Tuesday. Ahead of their arrival, President Donald Trump said Bombardier would be barred from the American market unless Canada shifts production of its aircraft to the United States. According to Quartz: "NO MORE SELLING BOMBARDIER IN THE UNITED STATES!" Trump wrote on Truth Social.
Markets in Asia and Europe also declined. Tokyo's Nikkei 225 shed 1.7%, Seoul's Kospi gave up 0.58%, Sydney's S&P/ASX 200 declined 1%, and Hong Kong's Hang Seng closed 0.38% lower. In Europe, the Stoxx 600 slid 0.4% in the opening stretch of the regional session.
Source: Quartz
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