Oil lifts inflation worries
US 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 on Thursday. The Dow Jones Industrial Average dropped 272 points, or 0.5%, and the Nasdaq composite slipped 0.3%.
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.
Wall Street's losses solidified in the afternoon session when oil prices accelerated upward. The price for a barrel of Brent crude, the international standard, rose 2.7% to $US90.87.
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 $US72 and $US102 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.
US Treasury bond yields climb
Monday's rally for oil prices sent US Treasury bond yields in the bond market higher, which in turn raised the pressure on the US economy and prices for all kinds of investments.
The yield on the 10-year Treasury climbed to 4.72% from 4.68% late on 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 US 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 inflation in July was not as bad as earlier in the American 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.
Warsh has been adamant about giving Wall Street less guidance about the Fed's plans for interest rates.
Retail earnings ahead
Wall Street has run to records despite high inflation in large part because profits are booming for US 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 2021, 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 less stable after US 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 shoppers surprisingly spent less at US retailers last month than in June, and CEOs for retailers could give colour this week on what they're seeing.
World markets mixed
On other global stock markets, 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.
