US Stocks Near Records as Oil Prices Retreat Slightly

U.S. stocks showed modest gains on Monday, with the S&P 500 edging closer to its record high as oil prices experienced a slight dip. The S&P 500 rose by 0.3%, putting it within 0.7% of its summer peak. Meanwhile, the Dow Jones Industrial Average dipped by 135 points, or 0.3%, while the Nasdaq composite climbed 0.5%, positioning itself to potentially set a new record.

The oil market saw significant volatility, with Brent crude prices fluctuating between $100 and $103 before settling at $101.94, down 0.3%. Uncertainty surrounding the war with Iran has contributed to the instability in oil prices, which in turn has impacted bond yields. The 10-year U.S. Treasury yield inched up to 5.29%, nearing its highest level since 2002. Higher yields can slow economic growth by increasing borrowing costs and making investors more cautious about high-priced stocks.

A report released on Monday provided a mixed outlook on the U.S. economy. While the services sector showed growth for the 27th consecutive month, the expansion was weaker than anticipated. Additionally, the report indicated that the costs of materials and services for these businesses were rising at a faster pace, a potential warning sign for future inflation. Despite economic challenges, consumer spending remains robust, though inflation continues to strain household budgets.

Wall Street expects the Federal Reserve to raise interest rates at least once more by the end of the year to combat inflation. The Fed last increased rates in September after a three-year hiatus. Notably, RXO surged 22.5% following a buyout announcement by C.H. Robinson Worldwide, while PTC soared 34.9% after Schneider Electric of France agreed to acquire the software company for approximately $22.6 billion.