Markets grew more volatile last week. Oil pushed above $100 a barrel, and Treasury yields rose as inflation data pointed to persistent price pressure. Together, these developments revived worries that interest rates could stay elevated longer than investors had expected.

 

Stocks fell for most of the week before rebounding Friday, while energy remained the main source of uncertainty.

 

 

Stock Index Performance

• The S&P 500 declined 0.80%.
• The Nasdaq 100 slipped 0.59%.
• The Dow Jones Industrial Average tumbled 1.57%.

 

 

The Bigger Picture

Oil turned from a sector story into a macro one. Crude prices surged as the conflict between the U.S. and Iran raised fears that shipping through the Strait of Hormuz could be further disrupted. Brent crude oil prices briefly topped $107 before easing back, while West Texas Intermediate (WTI) crude broke above $100 for the first time in months. Gasoline prices already jumped sharply in August, and further increases in fuel and shipping costs could keep inflation elevated well into the fall.

 

Inflation held steady, but core data was stickier. Consumer Price Index (CPI) data showed that inflation matched expectations in August, though core CPI, which strips out food and energy, came in slightly hotter than forecast. Wholesale prices reinforced that picture, rising faster than a year earlier as diesel costs jumped sharply for the month. The inflation data itself wasn’t a total surprise, but with oil prices climbing once again, price pressures could prove to be stickier than investors would hope.

 

Rising yields put pressure on stocks. Bond yields increased alongside oil, weighing on major indices. Higher bond yields can make future company profits worth less today, since investors now demand a bigger return to own stocks instead of safer bonds. That pressure hit growth-oriented technology shares hardest.

 

 

 

The Week Ahead

This week, all eyes will be on the Federal Reserve’s meeting on Tuesday (September 15) and Wednesday (September 16), where markets now see increasingly strong odds of a quarter-point rate hike. Beyond the decision the Fed makes regarding rates, markets will be watching whether policymakers frame the oil shock as temporary or as a lasting inflation threat, and whether that shifts their outlook for future moves.

 

 

 

 

 

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