US stock futures pointed to a weaker opening on Tuesday as Dow Jones Industrial Average futures fell over 400 points, while S&P 500 futures slipped 0.7% and Nasdaq-100 futures declined 1.3%. The weakness comes as investors assess whether elevated energy prices could keep inflationary pressures high and complicate the Federal Reserve's monetary policy outlook. Tech stocks Nvidia, AMD, Microsoft, and Alphabet slipped in pre-market trading, with Nvidia, AMD and Micron all falling more than 1%, while Microsoft declined about 1% and Google-parent Alphabet slipped 0.6%. The decline comes after a strong August for US technology stocks, with AI-linked companies among the market's leading performers, but September has historically been a challenging month for equities, adding another reason for investors to remain cautious as the new month begins. US stocks entered September after posting solid gains in August, with the major indexes carrying double-digit gains for the year, but rising energy prices and higher bond yields have added to caution at the start of a month that has historically been one of the weaker periods for equities.
US stock market indices started the trading session in the red following a renewal in military tensions between the US and Iran with regards to the Strait of Hormuz. The Dow Jones Industrial Average fell 370 points, or 0.70%, to close at 53,185.90, while the S&P 500 dropped 0.33% to 7,686.14. The Nasdaq Composite declined 0.12% to 26,370.89. According to the US military, its forces struck two Iranian launchers on Larak Island on Sunday after US forces stated that Islamic Revolutionary Guard Corps (IRGC) personnel were preparing to use rockets to deploy sea mines in the Strait of Hormuz. Iran's army on Monday claimed that it launched a drone attack on the United Arab Emirates' Al Minhad Air Base, saying that the strike targeted areas where US forces and helicopters were stationed, as retaliation. The decline was triggered by the US military's first attack on Iranian rocket launchers preparing to deploy mines into the Strait of Hormuz in over a month, marking a significant escalation in regional tensions. Oil prices jumped significantly as investors digested the geopolitical developments, adding to market uncertainty. Brent crude trading at a 0.45% uptick at ₹90.90 per barrel, while West Texas Intermediate rose 0.78% to ₹86.36 per barrel. Energy shares were the biggest gainers in the S&P 500, advancing 2.1% as US oil prices jumped 3% to briefly top $86 after the US and Iran exchanged strikes for the first time in about a month. Oil majors like Chevron Corp. and ConocoPhillips respectively rose 2.1% and 1.6% as President Donald Trump threatened Iran with more attacks.
Major technology stocks faced significant selling pressure during Monday's session. Shares of Amazon fell 2.5%, while Alphabet, Google's parent company, saw its stock slide 2%. Other notable declines included Nike down 1.36%, Microsoft falling 1.21%, Coca-Cola declining 1.10%, and Boeing dropping 0.97%. However, some technology stocks managed to buck the trend, with Tesla rising 5.5% to lead gains in the so-called Magnificent Seven group, ahead of its Cybercab launch event, scheduled for Thursday in Austin, Texas. NVIDIA gained 1.48% and SanDisk Corporation surged 5.5%, while Walmart advanced 1.72% and Salesforce rose 0.60%. Travel stocks like Royal Caribbean Cruises Ltd., Carnival Corp. and Norwegian Cruise fell, as fuel represents a major operating expense for the sector. The mixed performance in technology stocks reflects the broader market uncertainty caused by the escalating US-Iran tensions. In pre-market trading on Tuesday, technology shares continued to face pressure, with Nvidia, AMD and Micron each falling more than 1%, while Microsoft declined about 1% as investors assess whether higher energy prices and rising yields could challenge the equity market's strong run this year.
The US 10-year yield topped 4.75% on Monday for the first time since January 2025 as rising oil prices bolstered expectations that the Fed will lift borrowing costs. Swaps imply an almost 70% chance that the Fed hikes a quarter-point next month to rein in price pressures, up from 66% just before the session. On Friday, Federal Reserve Chair Kevin Warsh offered no signal on US interest rates, but stated that inflation remained too high and that policymakers should keep an eye on prices. As reported by Goodreturns, Warsh emphasized the need for clear market signals between financial markets and the central bank, stating that the Fed requires unfiltered market internals, asset price levels across sectors, Treasury securities trading volumes, dollar foreign exchange values, credit costs, and commodity prices to inform policy decisions. He noted that "inflation is running above our 2% target. So the Fed's predominant focus right now should be on prices". The weakness in futures was reflected across major technology stocks, with global bond yields continuing to climb, raising concerns that persistent inflation could limit the Federal Reserve's ability to ease monetary policy later this month. Investors are increasingly concerned that higher oil prices could feed into inflation, keeping central banks cautious on interest-rate cuts, with the rise in yields particularly significant for growth and technology stocks whose valuations are more sensitive to changes in borrowing costs and discount rates.
Bond yields climbed across major markets, adding another layer of pressure on equities. The benchmark US 10-year Treasury yield rose 3 basis points to 4.788%, its highest level since January 2025. Japan's 10-year government bond yield jumped more than 6 basis points to 3%, reaching its highest level since August 1996. The country's two-year government bond yield also touched 1.81%, its highest level in 31 years. Germany's benchmark 10-year yield also climbed to its highest level since 2011. The 10-year yield in the US is now nearing levels of 4.8%, last seen in January 2025, while the 30-year yield is also nearing pre-intervention levels, currently six basis points away from those highs. Japan's 10-year yield crossed the 3% mark for the first time in three decades, while the UK 30-year yield surged to the highest level since March 1998. Higher yields can weigh on stocks by increasing borrowing costs and making bonds relatively more attractive compared with riskier assets. Carson Group's Ryan Detrick noted that September has historically been the weakest month for US stocks, with the S&P 500 declining an average of 0.6% during the month and delivering a positive return only 45% of the time. September, along with February, is the only month of the year with a historically negative average return.
For the trading week of August 31 to September 4, experts have given a cautious outlook. According to Goodreturns, Nathan Peterson from Charles Schwab provided an overall "Cautious" outlook on stocks next week, noting that markets could see a "bounce back" from the Jackson Hole speech, which isn't uncommon the day after an FOMC meeting press conference. He highlighted that the Nonfarm Payrolls reports have been weak recently, and if next Friday's report is soft, this could ease rate hike concerns and translate into a bullish move for stocks. Key events include the G20 finance ministers and central bank governors meeting on Monday and Tuesday, the G20 Innovation Ministerial meeting from September 1-2 featuring keynotes from NVDA CEO Jensen Huang and OpenAI CEO Sam Altman, and the monthly jobs report on Friday. Peterson noted that stocks are also entering the month of September, which is historically the worst performing month for the S&P 500 index. Investors are revisiting some of the comments that Warsh made at Jackson Hole as well and what that may mean for interest rates, what that may mean for inflation, said Paul Nolte, senior wealth advisor & market strategist at Murphy & Sylvest in Elmhurst, Illinois. "If they do not hike rates in September, I think you will see a dramatic reaction in the markets because it's been prepped now for quite some time that they're going to raise rates." This week will bring monthly manufacturing and services sector data, as well as earnings from Nvidia Corp. rival Broadcom Inc. Other AI companies reporting this week include Dell Technologies Inc., Hewlett Packard Enterprise and Ciena Corp.
