S&P 500 Edges Up Amid Oil's 7.5% Drop as Rate Hike Chances Reach 38%

The S&P 500 closed at 7,413.18 on Monday, marking a modest gain of 0.02% despite oil's 7.5% drop. The chances of a Fed rate increase climbed to 38%, up from about 10% two weeks ago.

Fed funds futures suggest a 38% probability of a 25-basis-point increase on Wednesday, nearly quadrupling the likelihood since two weeks prior. WTI crude closed at $82.61, down from its previous week's climb of 9.2%. The yield on the 10-year Treasury slipped four basis points.

The chip index fell 2.2%, and technology shares provided a drag, with Nvidia Corp. dropping 5% and Microsoft Corp. rising 1.9%. Analysts project S&P 500 earnings to climb 39% in the second quarter compared to last year, much of which is attributed to artificial intelligence stocks.

Risks exist on both sides: fresh hostilities between the U.S. and Iran could push oil prices higher and boost inflation expectations, while a Fed rate hold and weaker PCE data could temper hawkish outlooks.