Stocks Fall on Rising Crude Prices and Higher Bond Yields

Stocks closed lower on Monday as rising crude prices and higher bond yields weighed on market sentiment. The S&P 500 Index SPY fell -0.52%, while the Dow Jones Industrial Average DIA dropped -0.51%. The Nasdaq 100 Index QQQ declined by -0.17%.

The jump in crude oil prices to a 3-week high was largely due to increased tensions between the US and Iran, with President Trump stating he's not interested in extending the expiring 60-day truce. This has boosted inflation expectations and bond yields, which are bearish factors for stocks. The 10-year T-note yield rose +3 bp to 4.72%.

However, technology stocks initially found support on Monday after strong revenue growth at Anthropic PBC bolstered the view that spending on artificial intelligence will be sustained. Anthropic's Q2 revenue jumped by at least 14-fold from the same period last year. Additionally, better-than-expected US economic news, including a stronger-than-expected Aug Empire manufacturing survey and Aug NAHB housing market index, also supported stocks.

On the other hand, signs of weakness in China's economy undercut global growth prospects and weighed on stocks. China's July industrial production rose +4.5% y/y, but missed expectations of +5.0% y/y. China's July retail sales also fell short of expectations at +0.6% y/y.

Energy stocks rose on Monday as WTI crude oil prices rallied more than +2% to a 3-week high. Crude prices were boosted by fresh Israeli attacks on Iran-backed Hezbollah in Lebanon, which dampened the prospects of ending hostilities in the Middle East and a quick reopening of the Strait of Hormuz.

A strong Q2 earnings season is also expected to support stocks, with the S&P 500 tracking for earnings growth of almost 32%. AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.