Key Takeaways:
- S&P 500 slipped 0.1% to 7,753.11 as Iran kept the Strait of Hormuz closed
- Brent crude jumped 5% to $87.72, reviving inflation fears
- Wednesday's CPI report expected to show inflation slowed to 3.4%
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U.S. stocks slip 0.1% as Iran keeps Strait of Hormuz closed
Wall Street's record-setting rally stalled Monday as Iran's refusal to reopen the Strait of Hormuz pushed Brent crude up 5% and revived inflation fears that had been easing.
The S&P 500 slipped 0.1% to 7,753.11 as Iran's refusal to reopen the Strait of Hormuz pushed Brent crude up 5% to $87.72.
Reports are on track to show earnings per share leaped 50% in the spring from a year earlier for companies in the S&P 500, according to FactSet — the best growth since the post-COVID recovery five years ago. Traders still see a nearly 52% chance the Federal Reserve will raise its main interest rate at its September meeting, according to CME Group data.
The Dow Jones industrial average dipped 60.95 points, or 0.1%, to 53,975.98, while the Nasdaq composite fell 0.3% to 26,605.36. The 10-year Treasury yield rose to 4.70% from 4.65% late Friday, up from 3.97% before the war with Iran. Berkshire Hathaway rose 1.5% after reporting stronger-than-expected quarterly profit, while Intel fell 4.1% after saying it may sell $15 billion of stock.
The continued closure of the Strait of Hormuz — a critical chokepoint for global oil supply — threatens to push energy prices higher and complicate the Fed's inflation fight. Wednesday's consumer price index report is expected to show inflation slowed to 3.4% from 3.5% in June, a reading that could determine whether the central bank raises rates in September.
Oil's 5% Jump Reshapes the Inflation Calculus
Brent crude swung between $72 and $102 per barrel last month as hopes rose and fell over a potential U.S.-Iran agreement to reopen the waterway. Monday's 5% jump to $87.72 brought prices back to levels last seen in mid-July, mid-June, and the first week of the war in March. Higher oil prices push inflation upward, and the main event for Wall Street this week will be Wednesday's CPI report. A slowdown would mean less pressure on the Fed to raise rates, while higher rates would slow the economy by making borrowing more expensive for households and companies. The yield on the 10-year Treasury has climbed from 3.97% before the war with Iran, sending rates for mortgages and other loans significantly higher.
Deal Activity Provides a Bright Spot
MarineMax jumped 46.1% after agreeing to sell itself for about $1.5 billion in cash to a Blackstone portfolio company. Varex Imaging leaped 48.8% after Teledyne Technologies said it would buy the X-ray imaging components maker for $18.90 per share in cash. Berkshire Hathaway, built by legendary investor Warren Buffett, said over the weekend it invested some of its massive cash pile into stocks under new CEO Greg Abel. The company has been famous for buying stocks at what it considers low prices, and criticism has been high that U.S. stocks generally look too expensive — but strong profits help them look less pricey.
In stock markets abroad, indexes were mixed in Europe after rising in much of Asia. Japan's Nikkei 225 jumped 2.1% for one of the world's bigger moves. The S&P 500 had set a record on Friday, powered by soaring profits for big U.S. companies, before Monday's pullback as the Hormuz impasse reasserted itself as the dominant macro risk. With oil prices now back near levels that preceded the war, the path for equities hinges on whether the waterway reopens and whether Wednesday's inflation print gives the Fed room to hold rates steady.
This article is for informational purposes only and does not constitute investment advice.
