Rising oil prices and firmer producer inflation are creating a more cautious tone across financial markets, as investors brace for a possible additional Federal Reserve interest-rate increase.
Oil prices broke above key levels. US West Texas Intermediate crude rose more than 4.6% to trade above $100 a barrel, while Brent crude climbed above $105. The increase came as the US-Iran conflict entered its seventh month, disrupting energy supply routes through the Strait of Hormuz and the Red Sea and raising concerns about global energy supplies.
Equities opened lower. The Dow Jones Industrial Average fell 153 points, the S&P 500 declined 0.56%, and the Nasdaq Composite dropped 0.81%, extending a three-day losing streak. The NYSE said rising oil prices and increasing yields are dragging markets lower and contributing to volatility.
Producer prices support higher rate bets. The Labor Department's Producer Price Index rose 0.4% in August from the previous month, in line with expectations, and increased 5.4% annually, slightly above the 5.3% forecast. Fed funds futures priced in a 70% chance of a 25-basis-point rate hike at the Fed’s next meeting, up from about 64% before the report, according to the CME FedWatch Tool.
Treasury yields climbed alongside oil, adding pressure to equities. The two-year yield reached 4.490%, its highest since 2024, while the benchmark 10-year yield rose to 4.901%, its highest since 2023. The Treasury Department’s plan to buy back up to $6 billion in longer-dated government bonds had limited immediate impact.
High-beta semiconductor stocks were among the notable decliners, with Intel falling 4.5% and Micron Technology dropping 3.6%. Investors now await Friday’s Consumer Price Index report for further signals on the Federal Reserve’s interest-rate path.
