U.S. stock markets edged lower on Monday, pulling back from record highs reached late last week. The Nasdaq composite led the decline, ending the session down 0.3%, while the Dow Jones Industrial Average dipped 60 points, or 0.1%. The S&P 500 slipped 0.1% from the record it established on Friday.
U.S. Stocks Retreat From All-Time Highs Amid Oil Price Surge
The market pullback coincided with a rise in oil prices, with Brent crude futures settling at $87.72 a barrel. Investors are reacting to uncertainty regarding the reopening of the Strait of Hormuz, a critical waterway through which a fifth of the world’s traded natural gas and oil once passed. Over the weekend, Tehran outlined demands for opening the strait, which include the withdrawal of U.S. forces, the ending of all sanctions, and the payment of war reparations. While Treasury Secretary Scott Bessent previously suggested a deal seemed imminent, Iran denied on Sunday that it was engaging in direct negotiations with the U.S. to end the war.
Corporate Earnings and Market Movers
Despite the daily dip, the second-quarter earnings season has been described as a blockbuster. The S&P 500 is currently on track for a seventh consecutive quarter of double-digit earnings growth. According to FactSet, earnings per share for S&P 500 companies leaped 50% in the spring compared to the previous year, marking the strongest growth since five years ago during the post-COVID economic recovery.
Several individual stocks saw significant movement on Monday:
- Berkshire Hathaway: Shares rose 1.5% following a report of a 16% jump in second-quarter operating earnings. The conglomerate, led by CEO Greg Abel, ended a 14-quarter streak of being a net seller of stocks by making nearly $20 billion in net purchases and buying back $4.5 billion of its own stock.
- Varex Imaging: The stock leaped 48.8% after Teledyne Technologies announced it would acquire the X-ray imaging component maker for $18.90 per share in cash.
- MarineMax: Shares jumped 46.1% after the marina operator and superyacht services provider agreed to be sold to a Blackstone portfolio company for approximately $1.5 billion in cash.
- Intel: The stock fell 4.1% after the company stated it may sell $15 billion of its stock.
Inflation Outlook and Federal Reserve Stakes
Wall Street is now shifting its focus to Wednesday’s inflation report for July. Economists anticipate the data will show consumer prices increased 3.4% from a year earlier, a slight decrease from the 3.5% rate recorded in June. A slowdown in inflation could reduce pressure on the Federal Reserve to raise interest rates, which would otherwise increase borrowing costs for households and companies and potentially undercut investment prices.
Despite a report on Friday showing unexpectedly weak hiring, traders still see a nearly 52% chance that the Fed will raise its main interest rate at the September meeting, according to CME Group data. This environment has contributed to a rise in the 10-year Treasury yield, which climbed to 4.70% from 4.65% late Friday. This is a significant increase from the 3.97% yield seen before the war with Iran began, a shift that has already pushed mortgage and loan rates significantly higher.
Global Market Context
While U.S. markets declined, international indexes showed mixed results. In Asia, Japan’s Nikkei 225 saw one of the world’s largest moves of the day, jumping 2.1%. European markets were mixed following the trend in Asia. The volatility comes as markets balance strong corporate profitability against the risks of stubborn inflation and geopolitical instability in the Middle East.
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