Oil prices rose, while US stocks weakened Tuesday

US stocks were weakening on Tuesday in their return to trading from a three-day weekend after the latest fighting in the war with Iran pushed oil prices higher.

The S&P 500 fell 0.4 per cent. The Dow Jones Industrial Average was down 520 points, or 1 per cent, as of 10 a.m. Eastern time, and the Nasdaq composite was 0.3 per cent lower.

In the oil market, the price for a barrel of Brent crude rose 1 per cent to US$97.95 after briefly climbing as high as US$99.46. It’s jumped from roughly US$72 over the last two months as increased fighting in the Middle East erodes hopes for a deal to reopen the Strait of Hormuz to oil tankers and get the global flow of crude going again.

More expensive oil has worsened worries about the high inflation weighing on people and companies across the country, which gives extra heft to a couple of reports coming later this week. On Thursday, the US government will release its August report for inflation at the wholesale level, which economists expect will show an acceleration to 5.4 per cent from 4.7 per cent in July.

The more closely watched report on inflation that US consumers are feeling will arrive on Friday. That update will show how much people are paying for groceries, clothes and other costs of living, and economists expect it eased a bit to 3.3 per cent from July’s 3.4 per cent inflation rate. That, though, remains well above the 2 per cent target that the Federal Reserve has set as its goal.

This week’s updates on inflation will be the last before the Fed meets next week to decide whether to cut, raise or hold interest rates steady. The traditional move for the Fed when inflation is high is to raise its main interest rate. That in turn would filter out into the rest of the bond market, make it more expensive for companies and people to borrow, slow the overall economy, undercut prices for investments and, hopefully, rein in inflation.

But President Donald Trump has been lobbying for lower interest rates instead, which could give the economy — and inflation — an extra kick. The Fed’s new chairman, Kevin Warsh, has meanwhile said he wants to give financial markets fewer clues about what the Fed plans to do with interest rates in the short term.

That all has traders betting on a 58 per cent probability the Fed will raise its federal funds rate after its next meeting finishes on September 16, according to data from CME Group.

In the bond market, the yield on the 10-year Treasury remained at 4.78 per cent, where it was late Friday, and is near its highest level since the autumn of 2023.

Higher Treasury yields put more pressure on companies to grow their profits in order to lift their stock prices.

On Wall Street, Boston Scientific fell 2.7 per cent after saying that a network outage caused by a cybersecurity incident earlier in the summer means that it’s unlikely to meet forecasts it gave for sales and profit for the third quarter and for the full year of 2026.

Shares of Novartis that trade in the United States tumbled 12.6 per cent after the Swiss pharmaceutical company gave a discouraging update on a study of a therapy for people living with myotonic dystrophy type 1, a neuromuscular disease.

Qualcomm helped limit the market’s losses after rising 4 per cent. It announced a deal to collaborate with Amazon on large-scale AI data centres. The deal also gives Amazon the right to acquire up to 25 million of Qualcomm’s shares at US$161.26 per share.

In stock markets abroad, Japan’s Nikkei 225 sank 1.7 per cent under the weight of losses for major exporters, which were hurt by more rises for the value of the Japanese yen against the US dollar.

A stronger yen erodes the value of sales made in US dollars when Toyota Motor, Panasonic Holdings and other Japanese exporters have to translate them back into yen. The Bank of Japan is also scheduled to meet next week on interest rates, and speculation is climbing that it could raise rates.

In China, indexes fell 0.4 per cent in Hong Kong and rose 0.2 per cent in Shanghai after the world’s second-largest economy said its exports jumped 25 per cent year-on-year in August, driven by strong demand for autos and high-tech items.

AP