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The main stock indexes were lower on Monday as oil prices and interest rates surged amid what looks more and more like a stalemate at the Strait of Hormuz. Investors, traders and speculators cast wary eyes on the Middle East ahead of the release of consumer and producer inflation data on Wednesday and Thursday.
A cooler-than-expected July jobs report lifted odds the Federal Open Market Committee (FOMC) will stay on pause when it meets again in September. Price action shifted back in favor of a rate hike today, though, as it appeared any durable peace in the Middle East will leave Iran in control of traffic through the critical channel connecting Persian Gulf oil and gas production to global markets.
“The S&P 500’s breakout from a nearly two-month trading range could get a test this week from inflation and geopolitics,” E*TRADE from Morgan Stanley Managing Director Chris Larkin writes. “The jobs report may have eased some anxieties about a Fed rate hike next month, but those concerns could hit new highs without cooler-than-expected inflation numbers this week.”
As Larkin notes, last week’s rally was based on enthusiasm about a deal to reopen the Strait of Hormuz. “Without a deal on the table,” he cautions, “markets may be less likely to respond positively to vague reports about progress in negotiations.”
The main event on this week’s economic calendar is the release of the July Consumer Price Index (CPI) report on Wednesday. Producer Price Index (PPI) data will follow on Thursday.
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The front-month West Texas Intermediate crude oil futures contract was up 4.9% on Monday to $82.05 per barrel. The 2-year Treasury yield rose to 4.241% vs 4.204% on Friday. The 10-year was up to 4.705% from 4.658%, the 30-year to 5.249% from 5.210%.
At the closing bell, the tech-heavy Nasdaq Composite had shed 0.3% to 26,605, the broad-based S&P 500 was lower by 0.06% to 7,753, and the blue-chip Dow Jones Industrial Average had declined 0.1% to 53,975.
Jefferies says AAPL is a sell
Apple (AAPL, -1.5%) was one of the worst-performing Dow Jones stocks on Monday after a team of Jefferies analysts led by Edison Lee downgraded the iPhone maker from Hold to Underperform, the equivalent of a Sell rating.
