Wall Street slips as oil climbs on inflation and Middle East worries
Stocks slipped on Tuesday and oil flirted with $100 a barrel prices as investors fretted over potential inflation concerns and ongoing conflict in the Middle East.
All three major U.S. indices dipped Tuesday, kicking off a holiday-shortened week on a lower note. The Dow Jones Industrial Average .DJI closed down 1.18%, while the S&P 500 .SPX dropped 0.58% and the Nasdaq Composite .IXIC slipped 0.32%.
MSCI's gauge of stocks across the globe .MIWD00000PUS was last down 0.55%.
Meanwhile, oil prices climbed after Iran-backed Houthis in Yemen attacked Saudi energy facilities. Brent crude oil LCOc1 was up 2.13% to $99.07 a barrel and U.S. crude CLc1 jumped 2.82% to $94.05 a barrel.
A resurgence in inflation has knocked the equity market in the past few weeks, in large part because of the surge in bond yields to multi-year highs, which puts central banks under pressure to raise interest rates.
The European Central Bank is all but certain to raise euro zone rates by a quarter point on Thursday this week, while the chances of the Bank of Japan doing the same next week are intensifying, which has set the yen on course for its strongest rally in two years. The Federal Reserve is also set to reconsider its rates, issuing a new statement on September 16.
U.S. inflation data on Friday could prove decisive in setting expectations for the outcome of the Fed's upcoming meeting. Right now, money markets show traders are attaching a roughly 58% chance of a rate rise 0#USDIRPR.
Oil remained the dominant theme on Tuesday, but the yen's surge looms large for global markets. Because of its status as a low-yielding currency, traders have borrowed yen in earnest to fund purchases of higher-yielding assets across currencies, bonds and equities, a strategy known as the carry trade.
In the last week alone, the yen JPY= has gained nearly 4%, its largest week-on-week increase since July 2024. On Tuesday, it was trading around 153.97, leaving the dollar slightly lower on the day.
The dollar index =USD, which measures the greenback against a basket of currencies, including the yen and the euro, rose 0.02% to 98.86.
In commodities beyond oil, the price of copper CMCU3 hit a record high on Tuesday, as global supply tightened with the metal continuing to flow into the U.S. ahead of possible tariffs.
Three-month copper on the London Metal Exchange was up 1.5% at $14,728 a ton.
In the bond market, benchmark U.S. 10-year Treasury notes US10YT=RR were yielding 4.8%, not far off their highest since November 2023.
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