U.S. stocks opened lower on Sept. 1, the first trading day of the month, as higher oil prices and rising global bond yields put pressure on risk assets. The Dow Jones Industrial Average fell 0.64%, the S&P 500 dropped 0.71%, and the Nasdaq declined 1.31%. The Philadelphia Semiconductor Index was at one point down more than 3%.
Among individual stocks, Intel and Qualcomm each fell nearly 3%. AMD and Meta were down more than 2%, while Tesla, Alibaba, and Nvidia each lost nearly 2%.
Oil and yields moved higher at the same time
The main source of pressure came from a simultaneous rise in oil prices and global bond yields. Brent crude climbed above $92 a barrel during the session. Markets were concerned that tensions in the Middle East and possible disruptions to shipping through the Strait of Hormuz could push up energy prices and inflation, strengthening expectations for additional Federal Reserve tightening.
CME FedWatch currently shows that the probability of a 25-basis-point rate hike in September, to 3.75%-4.00%, has risen to 66%.
Strategists split on the implications for equities
Paul Ciana, a technical strategist at Bank of America, said the S&P 500’s upside breakout that began in August remains intact, provided the index holds above 7,500. At the same time, RSI and MACD have not confirmed recent price highs, a sign that upside momentum is weakening.
Ciana said seasonal headwinds, election uncertainty, and rising front-end Treasury yields are creating a tougher setup for the market. Higher yields, he said, increase the risk that stocks move into consolidation instead of accelerating higher.
Matt Maley, a strategist at Miller Tabak, also warned that while equities had previously been able to look past rising yields, that does not mean the pressure from elevated yields will not eventually show up.
JPMorgan, by contrast, said higher yields may not become an insurmountable obstacle for the bull market, because they may also reflect stronger momentum in economic activity.