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.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
Facts Only
* S&P 500 closed down by -0.33%.
* Dow Jones Industrial Average closed down by -0.70%.
* Nasdaq 100 Index closed up by +0.08%.
* E-mini S&P futures (ESU26) fell by -0.28%.
* September E-mini Nasdaq futures (NQU26) rose by +0.07%.
* WTI crude oil rose more than +2% on Monday.
* 10-year T-note yield jumped to a 19-month high of 4.77% on Monday.
* October WTI crude oil prices (CLV26) jumped more than +2% to a 1-week high.
* The 10-year T-note yield rose to a 19-month high of 4.766%.
* Chinese Aug manufacturing PMI rose +0.6 to 49.8, stronger than expected of 49.5.
* Q2 earnings track for an S&P 500 earnings growth of almost 32%, above the projected +23%.
* 86% of the 486 S&P 500 companies reported Q2 earnings beating estimates.
* Energy producers rose, including SLB Ltd (+4%), ExxonMobil Holdings (+2%), and Chevron (+2%).
* Cryptocurrency stocks rose after Bitcoin jumped more than +2%.
* CrowdStrike Holdings (CRWD) closed up more than +5%.
* Edison International (EIX) closed down more than -23%.
* PG&E Corp (PCG) closed down more than -19%.
* Aon Plc closed down more than -9% due to an acquisition report.
* Howmet Aerospace (HWM) closed down more than -7%.
Executive Summary
Stock indices settled mostly lower on Monday, with the S&P 500 closing down -0.33%, the Dow Jones Industrial Average falling -0.70%, and the Nasdaq 100 rising +0.08%. E-mini S&P futures fell by -0.28%, while September E-mini Nasdaq futures rose by +0.07%. This market movement was influenced by rising geopolitical risks, which boosted crude oil prices and raised inflation expectations, pushing bond yields higher. The Dow Jones Industrial Average fell to a one-week low amid these pressures.
The backdrop for the market was complicated by comments from Fed Chair Warsh, who suggested financial conditions are not restrictive, increasing the probability of a rate hike at the next FOMC meeting to 65% from 36%. On the positive side, energy producers and cryptocurrency stocks gained momentum due to rising oil prices and Bitcoin's climb. Earnings results provided a bullish factor, with the S&P 500 tracking toward earnings growth of almost 32% in Q2, supported by expectations that AI spending will drive most earnings growth.
Overseas markets showed mixed results; the Euro Stoxx 50 closed down -1.01%, while the Shanghai Composite rose to a 1.5-week high. Interest rates saw movement as 10-year T-notes adjusted based on oil price surges and rate hike expectations, with German yields rising and market expectations factoring in a high probability of an ECB rate hike.
Full Take
The market dynamics presented a tension between rising inflationary pressures and underlying corporate earnings optimism, all while geopolitical volatility provided immediate downward force. The simultaneous rise in crude oil and bond yields demonstrates how external energy shocks immediately translate into macroeconomic risk priced into fixed-income assets and broader equity indices. The narrative suggests that short-term volatility—driven by Middle East conflicts and energy market shifts—is being overlaid on long-term structural themes, particularly the robust expectations surrounding AI-driven earnings growth.
A key pattern emerges in how sentiment is managed: geopolitical events and commodity price spikes trigger immediate risk-off behavior, evidenced by the sharp drop in the Dow Jones Industrial Average, while specific sectors demonstrate resilience or momentum, such as cybersecurity and energy producers. This suggests that investor attention shifts rapidly between external shocks and internal growth metrics. Furthermore, the divergence in regional economic data, like mixed Chinese PMI figures juxtaposed against strong Q2 earnings forecasts for the US market, reveals an underlying complexity where localized weakness does not negate systemic positive financial fundamentals. The persistent hawkish tone from monetary policy leaders creates a ceiling on risk appetite, influencing the probability of rate hikes and thus setting the trajectory for sovereign bond yields across Europe and the US.
What drives this interplay is a balancing act between immediate external uncertainty and long-term structural certainty. If the AI narrative about earnings growth materializes as expected, it should provide a floor, absorbing some of the impact from commodity volatility and geopolitical risk. However, the market's current discounting of rate hike probabilities, combined with the high yield environment, indicates that the fear of economic deceleration remains a significant weight. The necessary inquiry is: if corporate earnings support strong growth, why do sovereign yields remain elevated amid energy-driven inflation spikes? What assumptions about future demand or monetary policy are currently being implicitly priced into these diverging asset classes?
Sentinel — Human
The text reads like standard, detailed financial news reporting, integrating multiple, verifiable data points across global markets and geopolitical developments.