US Stocks Drop As Oil Prices and Bond Yields Climb

Rising oil prices on Monday knocked the US stock market further from its record high while adding even more pressure to the US bond market.

The S&P 500 fell 0.6 percent and gave back most of its gains from last week, which had brought it to the brink of its all-time high. The Dow Jones Industrial Average was down 222 points, or 0.4 percent, as of 1:48 pm Eastern time, and the Nasdaq composite was 0.6 percent lower.

Most of the US stock market sank after the most actively traded contract in the market for Brent crude oil initially jumped above $100 per barrel before later dropping back to $97.61 per barrel, a 0.2 percent increase.

That selling overshadowed a gain for Wall Street’s most influential stock, Nvidia, after it announced a historic funneling of cash to its investors through a buyback of its shares.

Oil prices have been yo-yoing on uncertainty about when the war with Iran will allow tankers to flow freely again through the Strait of Hormuz and deliver oil from the Middle East to customers worldwide.

The latest turns came after President Donald Trump said over the weekend he’s rejecting an offer from Iran to reopen the Strait of Hormuz and resume talks on its nuclear program.

Brent climbed above $101 per barrel Monday morning, before the US stock market opened for trading, but it pared its gains as US officials said mediators were still working with Iran and the United States on a deal to end the fighting and open the strait. For all its ups and downs, a barrel of Brent remains much higher than the roughly $72 it cost before the United States and Israel attacked Iran in late February.

That has helped worsen inflation, and the average price for a gallon of regular gasoline is up to nearly $4.48 from $3.13 a year ago, according to AAA.

Worries about inflation have in turn helped send Treasury yields much higher in the bond market. That pressures the economy because it makes borrowing money more expensive for everyone, while also undercutting prices for stocks and other investments.

The yield on the 10-year Treasury, which is the centerpiece of the bond market, jumped to 5.24 percent from 5.17 percent late Friday. That’s a considerable move for the bond market, and the 10-year yield is back to where it was in 2007, before the financial crisis and Great Recession sent yields toward zero. The 30-year Treasury yield, which leaped to 5.56 percent from 5.49 percent, is back to where it was in 2004.

On Wall Street, stocks of airlines and other companies with big fuel bills sank because of the rise in oil prices. American Airlines fell 2.4 percent , and United Airlines lost 1.8 percent. Gold miners were also weak after the price of gold sank 3.9 percent. Gold has a reputation for helping to protect its investors from high inflation.