U.S. stocks declined today as rising oil prices and higher U.S. Treasury yields weighed on the market. The Dow Jones Industrial Average fell 0.67% to close at 51,481.51 points. The broader S&P 500 dropped 0.77% to 7,683.69 points, while the Nasdaq Composite declined 0.92% to 26,820.38 points.
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Higher Oil Prices Fuel Inflation Concerns and Fed Rate Expectations
Oil prices moved higher after reports that U.S. President Donald Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz and end the fighting in the Middle East. Rising oil prices are increasing inflation concerns and reinforcing expectations that the Federal Reserve may continue raising interest rates.
“Iran is pushing oil prices higher, oil prices are pushing inflation higher, and inflation is pushing interest rates higher,” said Jack Ablin, an analyst at Cresset Capital. He added that interest rates are becoming increasingly attractive compared with equities.
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Dollar Strengthens as Investors Await Fresh U.S. Data
In the foreign exchange market, the dollar strengthened slightly on expectations of further U.S. rate increases and remained close to a two-month high against the euro. At around 10:00 p.m. CEST, the euro was down roughly 0.2% against the dollar and trading near $1.1370. According to Roberto Cobo of BBVA, higher oil prices are positive for the dollar mainly because of their impact on inflation and expectations surrounding the Fed.
The Fed raised its benchmark interest rate by a quarter of a percentage point this month to a range of 3.75% to 4.00%, while officials signaled that further increases could follow. Investors are now waiting for fresh U.S. economic data. On Wednesday, the government will release August figures for the Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, followed by the September labor market report on Friday.
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Source: ČTK
