Wall Street had a muted start to the week on Monday as investors balanced uncertainty surrounding the reopening of the Strait of Hormuz against a busy week of inflation data and corporate earnings that could shape expectations for Federal Reserve policy.
The Dow Jones Industrial Average fell 79 points. The S&P 500 was almost unchanged, while the Nasdaq Composite declined 0.13%.
Market participants are now focused on upcoming consumer and producer price inflation reports while monitoring developments in the Middle East that could influence energy prices and broader market sentiment.
Hormuz developments remain in focus as oil prices rise
Investor attention remained fixed on negotiations surrounding the Strait of Hormuz, a critical global oil shipping route.
Iran said it was close to reaching a final agreement with Oman on new shipping lanes through the strait but maintained that the United States must satisfy several conditions before the waterway can reopen.
While signs of progress have eased some concerns about prolonged supply disruptions, uncertainty over negotiations continued to support oil prices.
US West Texas Intermediate crude rose about 1% to around $79 per barrel, while Brent crude gained roughly 1% to trade near $84.
The reopening of Hormuz is viewed as a key factor in reducing supply concerns that have fueled higher oil prices and inflation expectations in recent months.
Markets also continued to assess mixed signals from Washington after recent comments suggested negotiations with Iran remained limited despite earlier indications that a deal could be approaching.
Inflation data, Fed expectations dominate market outlook
Investors are preparing for a crucial week of economic data, with consumer and producer price index reports expected to provide fresh insight into the inflation outlook and the Federal Reserve’s next policy decision.
Markets continue to price in a reduced likelihood of a September interest rate increase after July’s weaker-than-expected nonfarm payrolls report showed the US economy unexpectedly lost jobs.
According to CME FedWatch data, traders now assign roughly a 44% probability of a September rate hike, down from 67% a week earlier.
The softer labor market data has helped support equities by easing concerns that the Federal Reserve may need to tighten monetary policy further.
Despite continued inflation concerns, market optimism has been supported by expectations that moderating price pressures and stable monetary policy could sustain the current rally.
Strong earnings support equities despite cautious opening
US equities entered the week following their strongest weekly performance since April.
The S&P 500 finished last week at a record closing high, while the Dow Jones Industrial Average also touched record levels. The Nasdaq was likewise supported by continued strength in technology shares.
According to LSEG data, 85.1% of the 436 S&P 500 companies that have reported June-quarter results have exceeded analysts’ expectations, well above the historical average.
J.P. Morgan raised its year-end target for the S&P 500 to 8,000 from 7,800, citing resilient corporate earnings and growing confidence that heavy AI-related investment by hyperscalers will translate into stronger revenue growth.
This week’s earnings calendar is lighter but includes results from Applied Materials and Cisco, while investors will also monitor reports from companies including On Holding, Cava Group, Super Micro and CoreWeave.
Among notable movers, Intel declined 3.6% after announcing a $15 billion common stock offering.
Apple slipped 2% after Jefferies downgraded the stock to “underperform” from “hold.”
Elsewhere, GameStop gained in trading after a report said the company was considering withdrawing its proposed $56 billion bid for eBay.
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