Markets Drop Weighed Down By Rising Oil Prices

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The S&P 500 down 0.8%, the NASDAQ down 1%, the Dow Jones Industrial Average down 0.7%.

You're sitting just a touch above their session lows just before midday as rising oil prices and treasury yields new pressure on stocks.

Oil is approaching its overnight high up 3 bucks, up 3.3% to $95.41 a barrel, following President Trump's rejection of Iran's conditional approval to reopen the Strait of Hormuz. Meanwhile, the 10-year Treasury note yields its up 10 basis points to 5.26.

As has been the story of September, the results are predictable. Weakness is broad, with climbers outpacing advanceors by roughly 4 to 1

8 S&P 500 sectors trade lower, while pressure on mega cap stocks has left the communication services sector down 1.8%. Consumer discretionary down 1.4% are some of the sectors' weakest performers today. Meta is giving up about 4% as a trillion dollar plus company. It's giving back some of its last week's double digit advance. Pretty normal, pretty common. NVIDIA is helping limit the decline today, and the IEA announcing $150 billion increase to its share repurchase authorization and AI safety data platform. More on that in just a second. So the S&P 500, the Dow, the NASDAQ are all down between 3 quarters of 1% and 1%, with the Russell 2000 down 1% as well. Gold City down $167 an ounce to $4153. Bitcoin trading down $1277 to $83,176. It's crude oil and the bonds that are the story today.

The focus this week is going to be on US jobs and inflation.

The Federal Reserve raised US interest rates this month for the first time since 2023 Is it just the beginning? Or is it going to depend on 2 economic pieces of data this week? The Fed has 2 mandates, keeping prices around 2% a year on inflation and keeping Americans employed. Wednesday we get the inflation side of the conversation. We've already had August's Consumer Price Index inflation rating, and it came in just as hot as expected. Prices for the everyday stuff that households were buying were up 3.4% year over year. With core inflation taking out volatile food and energy prices just up 2.4%.

It's pretty close to their 2% mandate.

But we're going to get the reading of the personal consumer, the personal consumption expenditures on Wednesday. On Friday we get the jobs report for Americans. Are they keeping employed? Let's talk a little bit about how yields can hurt you in surprising ways.

We know that if you get a 5% yield on a bond that's paid by the United States government, you're probably going to get your 5% yield on top of your money back. But it's not that guaranteed in stocks, although historically in the last 100 years they've averaged about 10% returns. It's not guaranteed. So a surprising way that yields can hit you would be your electric bill. Utilities need billions of dollars to build power plants, upgrade the grid and connect all those AI data centers. Higher borrowing costs eventually get reflected in the rates consumers pay.

Second way that higher yields can hurt you is your rent. Higher yields makes it more expensive to build apartments and refinance existing buildings. That can slow down new construction and keep housing supply tight. Third, higher yields can hurt your local taxes and fees. Cities borrow money to build roads, sewer systems, water plants and other infrastructure. Higher interest costs can eventually show up in property taxes, water bills, and tolls. That's one of the reasons you have to pay attention to treasury yields. And the higher the treasury yields go, it creates a problem not just for Wall Street, but for you. There's a higher cost of doing business for the entire economy, and eventually somebody pays that bill. Ten-year treasuries are at 19-year highs. Not one investor in January would have predicted the stock market to rise 13 percent, while the ten-year treasury surged 100 basis points to a two-decade high. Record profits have carried the market's valuation math and made stocks cheaper in the process. Interesting.

So something's got to give. The S&P 500 is hanging near record highs, but the average stock isn't getting the memo. Last week, the Cineconductor ETF jumped 5.9 percent, the Nasdaq gained 3.2 percent, while the equal-weighted S&P 500 fell 0.6 percent of 1 percent, while small caps dropped 0.8 percent of 1 percent. BTIG says fewer than half the S&P 500 stocks are above their 200-day moving average, while the index has seen more new 52-week lows than highs for nine straight days, something not seen since 2000 It's not just breadth. Credit markets are starting to show stress. CCC-rated credit spreads widened 11 of the past 14 days and investment-grade tech credit default swaps hit their widest since 2023 See, headline S&P looks healthy. The returns look great, but underneath the surface, fewer stocks are doing the same heavy lifting. The credit markets are starting to raise their own warning flags. When interest rates move higher, it's okay. But when interest rates move higher faster, it changes a lot of math on refinancing that was unexpected to basically contribute more cost to any projects that are funded with credit. Oil is a big part of the problem today. President Trump said he rejected a peace proposal for Iran. Both pathways for Middle East oil exports now seem partially shut with no sign of change. NVIDIA added $150 billion to its buyback authorization, bringing the total program size to $235 billion.