Wall St ticks lower as markets monitor Hormuz situation; data awaited
Wall Street’s main indexes inched lower on Monday after the S&P 500 and the Dow hit record highs last week, as investors weighed Middle East developments and awaited crucial inflation data and earnings. Iran said it was close to a final agreement with Oman defining new shipping lanes between them, but repeated that the U.S. must meet several conditions before the strategic waterway reopens.…
On Monday, Wall Street's major indexes retreated slightly as investors considered recent developments in the Middle East and awaited important economic data. Iran and Oman appeared on the verge of finalizing an agreement to establish new shipping lanes through the strategic Hormuz Strait, but Iran insisted that the U.S. must satisfy several conditions before the waterway could reopen.
The potential reopening of this critical choke point could help alleviate worries about soaring oil prices, which have fueled inflation concerns and prompted central banks worldwide to anticipate interest rate hikes.
Key economic indicators, such as consumer and producer inflation reports due later in the week, could provide crucial insights into the Federal Reserve's monetary policy trajectory. Fed Chair Kevin Warsh has been cautious in his forward guidance, stating that high inflation is close but not far from the 2% target the central bank aims for. Some market participants believe that a CPI report showing calm inflation and no September rate hike would allow the market to advance more freely.
The recent rate-hike outlook has been tempered somewhat after the U.S. economy unexpectedly shed jobs in July, leading traders to now estimate a 44% probability of a hike in September, according to the CME FedWatch tool. Within the S&P 500, six of its 11 sectors fell, with real estate and consumer staples stocks suffering the most.
The S&P 500's technology index declined by 0.4%, while Apple shares dropped 2.4% following a downgrade by Jefferies, and Intel lagged behind with a 4.8% decline after issuing a $15 billion stock offering.
Conversely, the S&P 500 energy index rose 2.6%, mirroring a 2% increase in oil prices. At 9:35 a.m. ET, the Dow Jones Industrial Average slipped by 72.88 points, or 0.13%, to 53,964.05, the S&P 500 fell by 5.22 points, or 0.07%, to 7,752.42, and the Nasdaq Composite slipped by 61.56 points, or 0.23%, to 26,629.06. The benchmark S&P 500 reached a record close on Friday, while the blue-chip Dow .DJI had already met all-time highs last week.
The robust earnings from tech firms, particularly those in AI, helped offset some of the concerns surrounding high spending without sufficient evidence of its positive impact. As of now, 85.1% of the 436 S&P 500 companies that have reported earnings so far for the June quarter have surpassed estimates, a figure that surpasses the typical 67% seen in a typical quarter since 1994.
The earnings calendar will be lighter this week, with only Applied Materials and networking equipment maker Cisco expected to report.
Outside of the earnings news, the U.S. Senate passed a temporary bill on Saturday to fund federal agencies through December 11, averting a potential shutdown weeks before the November midterm elections. On the trading front, declining issues outnumbered advancers by a ratio of 1.5-to-1 on the NYSE and 1.26-to-1 on the Nasdaq. The S&P 500 reached nine new 52-week highs without any new lows, while the Nasdaq Composite recorded 40 new highs and 23 new lows.
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