US stocks fell on Monday as the US-Iran standoff sparked market worries that rising energy prices could keep inflation persistently high, in turn forcing the Federal Reserve to take more aggressive rate hikes. The Nasdaq 100 index closed down 1.1% in New York, while the S&P 500 fell 0.8%. Both indexes touched their lowest levels in 10 days.
Traders have been trying to interpret conflicting signals regarding US-Iran ceasefire negotiations. US stocks pared deeper earlier losses after reports said US President Trump was open to easing sanctions based on progress on Iran's nuclear issue. However, Trump's rejection of Iran's latest proposal to reopen the Strait of Hormuz intensified the selloff in the US Treasury market. Iranian officials are privately pessimistic about reaching an agreement with Washington and reopening this key waterway before the US midterm elections in November.
"The three-headed monster is scaring the market today," David Waddell, chief investment strategist at Coastal Bridge Advisors, said in an interview, referring to the pullback in major stock indexes. "That is rising interest rates, rising oil prices and a strengthening dollar." Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management, said stocks appear worried about the potential consequences of rising rates, with daily rate swings increasingly dictating market performance.
A series of important economic reports will be released this week and are expected to further show that the US economy is strengthening. This will support the view of several Fed officials that interest rates should be at higher levels. The performance of the artificial intelligence (AI) trade may also become a market focus, with Micron Technology scheduled to report earnings after the close on Wednesday. Nvidia shares rose after the chip developer increased its stock buyback program by a record $150 billion.
At the close, the S&P 500 fell 0.8% to 7,683.69 points; the Dow Jones Industrial Average fell 0.7% to 51,481.51 points; the Nasdaq Composite fell 0.9% to 26,820.38 points; the Nasdaq 100 fell 1.1% to 30,276.81 points; and the Russell 2000 fell 0.7% to 2,817.912 points.
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