US Stocks Plummet as Oil Prices Surge, Fueling Inflation Worries

The US stock market closed lower on Tuesday due to rising oil prices and concerns about stubbornly high inflation. The S&P 500 index fell 0.7%, the Dow Jones Industrial Average dropped 0.8%, and the Nasdaq composite slid 1%. Technology stocks, including Nvidia, Amazon, and Advanced Micro Devices, were among the heaviest weights on the market.

The sell-off in US government bonds continued, with the yield on the 10-year Treasury rising to 4.79% from 4.75% late Monday. The yield on the 2-year Treasury rose to 4.39% from 4.34% late Monday. Bond yields have an inverse relationship to prices, so a rise in yields signals that investors are demanding a higher return from Treasurys because they are becoming riskier.

The US debt surpassed $40 trillion two weeks ago, highlighting the growing government debt and its impact on borrowing costs. Higher oil prices have pushed up costs for everything from gasoline to shipped goods, fueling inflation. The price of Brent crude rose 4.6% to settle at $94.65, while U.S. oil climbed 5.2% to settle at $90.22 per barrel.

The Federal Reserve is expected to raise interest rates before the year is over in order to try to bring inflation down to its 2% target. Investors are betting on a 66% chance that the central bank will raise its benchmark interest rate at its upcoming September meeting, according to CME FedWatch.