US stocks: Wall Street ends lower due to higher yields, rising oil prices

On Tuesday, September 1, US stocks experienced a significant decline as the global bond selloff intensified and crude prices surged due to the escalating US-Israeli war with Iran. All three major US stock indexes started the month on a negative note, closing lower as rising hostilities in the Middle East pushed up oil prices. The benchmark US Treasury yield continued to rise, reaching multiyear highs after hitting a 19-month high the previous day.

Investment strategy analyst Ross Mayfield from Baird explained that Kevin Warsh's hawkish remarks, coupled with the Iran conflict and rising oil prices, created a perfect scenario for a risk-off day in a market trading near all-time highs. Seasonal weakness may also be contributing to the downward trend, as September is historically the worst-performing month for US stocks since 1926.

The situation escalated when the US launched airstrikes against Iranian targets in the Strait of Hormuz, following Treasury Secretary Scott Bessent's announcement of potential new sanctions against Iran. Iran responded by threatening to halt oil exports from the Gulf, further driving up crude prices and adding to inflation concerns. The FedWatch tool indicated a 68.2% probability that the Federal Reserve would raise interest rates by 25 basis points at its September meeting, up from 39.6% a week prior.

Job market reports and Purchasing Managers' Index data suggested that the US economy is facing challenges, with high prices, supply constraints, and uncertainties arising from tariffs and geopolitical strife. The Dow Jones Industrial Average fell 0.79%, the S&P 500 dropped 0.71%, and the Nasdaq Composite lost 1.03%. Energy stocks gained, while consumer discretionary suffered the largest percentage loss.

The Dow Jones Transportation Average saw the biggest decline, and declining issues outnumbered advancers by a 2.8-to-1 ratio on both the NYSE and Nasdaq.