US stocks fell on Monday as rising oil prices and Treasury yields weighed on equities, while investors assessed uncertainty around the prospects for a US-Iran peace deal and its potential impact on Federal Reserve policy.
The Dow Jones Industrial Average fell 343.78 points, or 0.66%, to 51,484.84.
The S&P 500 declined 0.76% to 7,684.41, while the Nasdaq Composite dropped 0.91% to 26,822.09.
The major averages moved off their session lows after reports suggested President Donald Trump remained open to providing sanctions relief to Iran on nuclear matters.
The reports helped crude prices retreat from their highs, although oil remained a source of inflation concerns.
Oil prices and Treasury Yields pressure stocks
Oil prices have risen in recent sessions as uncertainty over a potential US-Iran peace agreement increased.
Crude had initially jumped after Trump rejected an Iranian peace proposal, although expectations of talks involving Qatari mediators helped limit the gains.
Higher oil and diesel prices have added to inflation concerns, contributing to higher Treasury yields.
The benchmark 10-year Treasury yield climbed above 5.2%, while the 30-year Treasury yield moved above 5.5%. Both yields traded around multiyear highs.
The rise in borrowing costs has added pressure to equities, particularly as investors reassess the relative attractiveness of bonds and stocks. Higher yields can also increase financing costs for companies and consumers.
Federal Reserve officials have continued to monitor inflationary pressures.
Fed Governor Lisa Cook said she expects inflationary pressure to continue in coming months because of AI-related demand and higher oil prices, although she did not indicate that additional rate hikes would necessarily be required.
AI stocks decline as Nvidia bucks trend
Several major technology and AI stocks declined alongside the broader market.
AMD and Micron fell about 4% and 2%, respectively, while Amazon and Microsoft each declined about 1%. Meta Platforms dropped 4%.
Nvidia moved in the opposite direction after announcing an additional $150 billion share repurchase authorization, bringing the total value of its buyback programme to $235 billion.
The announcement supported Nvidia shares even as other AI-related stocks declined.
The market also faced company-specific pressure.
Boeing shares fell after the Federal Aviation Administration said software problems with the 737 MAX would delay certification of the MAX 10 until the agency is satisfied that the issue has been addressed.
Tesla shares also declined after JPMorgan lowered its price target, citing weak third-quarter deliveries.
Fed rate expectations and economic data in focus
Markets have increased expectations for another Federal Reserve rate increase at the October meeting.
CME FedWatch data showed a 70.3% probability of at least a 25-basis-point hike, up from 57.6% a week earlier and 17.7% a month earlier.
Investors are now awaiting several economic releases that could influence expectations for monetary policy.
The August personal consumption expenditures price index, the Fed’s preferred inflation measure, is due Wednesday.
US manufacturing data is scheduled for Thursday, followed by the September jobs report on Friday.
The reports could provide further information about inflation and labour-market conditions as investors assess the outlook for interest rates.
The declines came after a strong previous week for technology stocks.
Meta gained nearly 13%, while Microsoft rose more than 4%. Apple and Nvidia also advanced.
The latest pullback reflects renewed pressure from oil prices, higher Treasury yields and shifting expectations for Fed policy.
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