BANGKOK – U.S. stocks edged further from their record heights on Monday after rising oil prices cranked up the pressure on inflation and financial markets.
The S&P 500 fell 0.5% but remains near its all-time high set Thursday. The Dow Jones Industrial Average dropped 272 points, or 0.5%, and the Nasdaq composite slipped 0.3%.
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Wall Street’s losses solidified in the afternoon when oil prices accelerated upward. The price for a barrel of Brent crude, the international standard, rose 2.7% to $90.87.
It’s been careening back and forth because of uncertainty about what the war with Iran will do to the global flow of crude. Last month alone, Brent zigzagged between $72 and $102 as hopes rose and fell that the United States and Iran could reach a deal that would allow oil tankers to freely exit the Persian Gulf again.
Monday’s rally for oil prices sent Treasury yields in the bond market higher, which in turn raised the pressure on the economy and prices for all kinds of investments.
The yield on the 10-year Treasury climbed to 4.72% from 4.68% late Friday. It has shot up from just 3.97% before the war with Iran, largely because higher oil prices are worsening inflation and upping the probability that the Federal Reserve will have to hike interest rates.
Higher rates could keep a lid on inflation, but they do so by intentionally slowing the economy. The average long-term U.S. mortgage rate has already jumped near its highest level in a year because of the rise in the 10-year Treasury yield, though reports last week said that inflation in July was not as bad as earlier in the summer.
Usually around this time of year, anticipation is building on Wall Street to hear from the head of the Federal Reserve about where it may take interest rates. But the Fed’s new chairman, Kevin Warsh, may give little insight at this year’s economic symposium in Jackson Hole, Wyoming, at the end of this month, according to Thierry Wizman, a strategist at Macquarie Group
Warsh has been adamant about giving Wall Street less guidance about the Fed’s plans for interest rates.
Wall Street has run to records despite high inflation in large part because profits are booming for U.S. companies.
Those in the S&P 500 index are on track to deliver growth of roughly 50% for earnings per share in the spring from a year earlier, according to FactSet. That’s much better than analysts expected and would be the best since five years ago, when the economy was erupting out of the chasm created by the COVID pandemic.
Nearly all the companies in the S&P 500 have turned in their profit reports for the spring. Still to come are big retailers, including reports this week from Home Depot, Target and Walmart.
They’re facing pressure. Their customers’ incomes may be turning iffier after U.S. employers surprisingly cut more jobs last month than they added. At the same time, their customers are continuing to see bills rise quickly as inflation remains much higher than anyone would like.
A report last week said that shoppers surprisingly spent less at U.S. retailers last month than in June, and CEOs for retailers could give color this week on what they’re seeing.
On Wall Street, trading was relatively quiet Monday.
L3Harris Technologies fell 4.6% after the defense company said Christopher Kubasik stepped down as its CEO and chairman following “certain conduct by Kubasik that was not consistent with the values of the Company.” It gave few details but said the conduct was not related to its financial reporting, controls, customer relationships or operational performance.
Alphabet dipped 0.5% even though Berkshire Hathaway said it increased its investment in Google’s parent company, along with several homebuilders. Berkshire built a reputation for buying stocks at affordable prices under its former CEO, famed investor Warren Buffett.
Constellation Brands fell 6.2% after Berkshire said it sold all its holdings in the seller of Modelo beer and Robert Mondavi wine.
All told, the S&P 500 fell 40.70 points to 7,745.06. The Dow Jones Industrial Average dropped 272.63 to 53,459.78, and the Nasdaq composite slipped 84.25 to 26,644.91.
In stock markets abroad, indexes dipped in Europe following a stronger finish in Asia.
Tokyo’s Nikkei 225 rose 0.7% after a report said Japan’s economy grew at a slower pace in the April-June quarter than economists expected. Indexes jumped 1.3% in Hong Kong and 1.4% in Shanghai for some of the world’s biggest moves.
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AP Business Writers Yuri Kageyama and Michelle Champan contributed to this report.
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Earlier versions of this story incorrectly reported that Japan’s economy grew slightly faster than expected in the April-June quarter.