Traders work on the floor of the New York Stock Exchange.
NYSE
Stocks fell on Tuesday, the first day of September, as inflation worries and elevated oil prices lifted bond yields in the U.S. and abroad, raising concern about whether the Federal Reserve will tighten monetary policy later this month.
The Dow Jones Industrial Average shed 419.02 points, or 0.79%, to end at 52,766.88. The S&P 500 declined 0.71% to 7,631.47, while the Nasdaq Composite pulled back 1.03% and closed at 26,099.77.
Oil prices rose after U.S. Central Command said that American forces were attacking Islamic Revolutionary Guard Corps targets in Iran. U.S. oil prices gained 5.2% to close at $90.22 per barrel. Brent futures added 4.6% to close at $94.65.
This adds to oil’s advance at the start of the week following a resumption of military action between the U.S. and Iran. On Monday, a tanker passing through the Strait of Hormuz was hit by three unknown projectiles. Additionally, President Donald Trump threatened to respond to Iran’s latest attacks on U.S. military bases in the region, telling Fox News Monday that “we are going to hit them hard.”
Global bond yields also continued their march higher Tuesday. The U.S. 10-year Treasury note yield scaled to levels not seen since January 2025. Japan’s 10-year yield reached its highest level since August 1996, while Germany’s benchmark yield rose to a 2011 high.
Yields around the world have been rising recently as traders worry that persistently higher oil prices may drive inflation and influence the Fed’s interest rate path. The central bank is slated to meet next in two weeks. On top of that, September has been a historically bad month for stocks.
“Always and forever, the stock market is going to struggle to digest big and kind of volatile moves in the bond market,” said Ross Mayfield, Baird investment strategist. “I think this is with us for the near term and the long term.”
Even with the worries around inflation, Mayfield said there just haven’t yet been enough changes in the economic data that would support an interest rate hike in September. Fed funds futures pricing currently shows a 68% chance that the central bank will raise rates at the next meeting, according to the CME FedWatch tool.
“I know the market is anticipating a hike right now, or at least placing better odds on a hike than hold. I still think they hold in September, but probably have to hike at least once by the end of the year,” he said while cautioning that “a lot can change” before the meeting, especially with the August nonfarm payrolls report due Friday.
