A combination of the flare-up between US and Iran, and the subsequent impact on bond yields and crude oil prices, coupled with fears of the US Fed hiking interest rates this month kept sentiments subdued on Wall Street on Monday.
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Benchmark indices on Wall Street began the new trading week on a negative note but managed to end the month of August with gains as the latest flare up in West Asia soured sentiments on Wall Street.
The Dow Jones ended the session 370 points lower led by losses predominantly in shares of Goldman Sachs and Alphabet. The S&P 500 and Nasdaq recovered from their respective day’s lows but closed below the flat line.
Despite Monday’s drop, the Dow Jones ended the month of August higher by src%, while the S&P 500 and Nasdaq gained 2.6% and 3.9% respectively. This was the fifth straight monthly advance for the Dow Jones, which has now gained in src5 out of the last src6 months.
Why Did The US Markets Fall On Monday?
A combination of factors soured sentiments on Wall Street at the start of the week. First is the recent flare up in tensions between the US and Iran in West Asia, with the US Central Command launching a measured attack on Iran’s Larak Island and Iran’s IRGC responding with attacks on US military assets in Jordan and the UAE, leading to further fears that the conflict, which has now entered its seventh month, would likely drag on further.
The recent flare-up in tensions led to a rise in crude oil prices, with Brent Crude rising past $90 a barrel mark. West Texas Intermediate, or US Crude also rose and is extending its gains in early Asia trading on Tuesday, trading close to the mark of $85 a barrel.
This rise in crude oil prices also impacted the bond markets, with the US src0-year bond yield rising to 4.75%, the highest level since January 2025. The 30-year yield also rose to 5.26%, slowly inching back towards the 5.33% level they had surged to in August, before the Treasury intervention.
Rising oil prices are not the only concerns plaguing the bond markets. Fears of the US Federal Reserve hiking interest rates are back on the table after Fed Chair Kevin Warsh’s “We have got work to do” remark at the Jackson Hole symposium last week. The probability of the central bank raising rates by 25 basis points two weeks later has now risen to 66% compared to 36% before Warsh’s address, according to the CME FedWatch tool.
The Fed has two major data points upcoming that will determine the course of the policy action. Friday will see the non-farm payrolls report for August and experts believe that a stronger-than-expected print could be perceived negatively by the market. This will be followed by the August Consumer Price Inflation (CPI) print next week.
The start of the new month means a slew of macro data being reported. The US will see manufacturing PMI and the JOLTS Job openings data later this evening, along with companies such as Palo Alto Networks, Dell and MongoDb reporting results.
Home Market News Dow Jones falls 370 points on Monday – Here are three major reasons why
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