U.S. stocks ended Friday in the red after giving up earlier gains. The S&P 500 lost 0.25% to 7711.76, the Nasdaq fell 0.52% to 26402.42, and the Dow Jones Industrial Average edged down 0.02% to 53559.99. For the week, the Dow rose 0.03%, while the S&P 500 slipped 0.08% and the Nasdaq dropped 0.28%.
Two things changed the mood over the weekend. Federal Reserve Chair Waller came out hawkish at the Jackson Hole global central banking conference, and fighting between the U.S. and Iran sent crude higher in early Monday trading in Asia. Trump also said the U.S. had struck what he called the biggest oil deal in history with Venezuela. That added a fresh supply variable to the energy story.
Waller’s Jackson Hole remarks pushed rate-hike expectations higher
Markets took Waller’s speech as plainly hawkish. The report said the tone stacked up with some of the hardest Federal Reserve messaging since 2009. According to the article, Waller signaled the Fed could raise rates if inflation does not come down fast enough. That pushed market pricing for a September hike from 35% to nearly 60%. Traders also started pricing in as many as two hikes by March 2027.
Treasuries moved fast. The 10-year yield rose 4.18 basis points to 4.7180%, after first hitting an intraday low of 4.6485% and then snapping higher. The 2-year yield climbed 11.14 basis points to 4.3434%, after trading as low as 4.2135% before the prepared remarks came out. Short-term yields rose far more than long-term ones. Simple message: the curve flattened, and the market was betting on a tougher tightening path.
FX told the same story. The U.S. dollar index jumped 0.55% to 99.703, the highest level in two weeks. Offshore yuan was quoted at 6.7308 at the New York close, down 114 points from the prior session. The yen weakened past 160, back to levels seen before Japan’s late-July currency intervention.
Rate-sensitive assets retreated as yields climbed
Waller’s message hit the rate-sensitive corners of the market right away. Small-cap indexes dropped more than 1%. Spot gold fell 3.2% to $4454.23 an ounce, snapping a three-week winning streak. Bitcoin slid from $81,455 to $76,877 during the session and at one point was down more than 5%.
That move was a sharp reminder. Higher yields can punish expensive growth assets in a hurry, especially the sectors priced on cash flows that sit far out in the future.
Weekend U.S.-Iran strikes lifted oil in early Asian trading
Tensions jumped over the weekend. U.S. officials said Sunday that American forces struck two weapons sites on Iran’s Larak Island, saying Iran had tried to lay mines in the strait. Iran’s military said the strike on Larak Island injured several people and that it answered by launching missiles at U.S. bases. The report called the weekend exchange an escalation in direct military confrontation between the two sides.
Before that, Iran’s president had said, "If the Strait of Hormuz is reopened, the United States must fulfill its obligations." Iran’s military also said, "Vessels may not pass without coordination." Iran’s deputy foreign minister said Tehran had reached an understanding with Oman but was in no hurry to reopen the Strait of Hormuz. So yes, the operating outlook for the waterway turned uncertain again.
Oil flipped direction. On Friday, WTI crude settled down 0.16% at $83.40 a barrel, while Brent crude fell 0.87% to $89.31 a barrel. After the weekend military exchange, international crude gained more than 2% in early Monday trading in Asia. In the report’s view, the earlier pullback tied to easing geopolitical tension was erased, and geopolitical risk premium started creeping back into prices.
Venezuela oil deal adds a second force pulling on crude
Trump said over the weekend that the U.S. had reached an oil deal with Venezuela, and Venezuelan officials later confirmed that the two sides had signed a large-scale cooperation agreement. Under the disclosed framework, the deal lasts 25 years and is meant to lift Venezuela’s crude production to 1.5 million barrels per day. It includes development of 17 strategic oil fields and more than $100 billion in investment.
Trump said the U.S. would secure majority control over more than 65 billion barrels of reserves to refill the Strategic Petroleum Reserve. The report said the size of the agreement was far beyond what the market had expected.
But getting it done is another matter. The article said Venezuela’s current infrastructure will need time to recover, and U.S. domestic politics are still a variable too. Near term, rising supply expectations from Venezuela and rising geopolitical risk from the U.S.-Iran confrontation are tugging crude in opposite directions.
Chip stocks retreated broadly, with Nvidia giving back part of its post-earnings rally
The Philadelphia Semiconductor Index fell 3.47% on Friday to 11469.66. Nvidia dropped 4.57% to $217.55, giving back about half of its post-earnings gains. The rest of the chip group looked weak too. Marvell Technology fell more than 10%, and Intel, AMD, and Broadcom also moved lower.
The Magnificent Seven fell about 1.2% as a group. Microsoft was the leader inside that group, extending its winning streak to six sessions and rising more than 6% for the week. Tesla was the weakest, down about 2%. Software and hardware split apart. Workday climbed nearly 6% after what the report called strong second-quarter results driven by AI applications. Salesforce gained more than 20% for earnings week and still rose nearly 2% on Friday.
The article said the split suggests money is rotating out of hardware and into software and the application layer. At the same time, higher rates are shrinking the present value of long-dated cash flows. That leaves semiconductor stocks especially vulnerable.
Three issues in focus this week
1. Repricing of the rate path after Jackson Hole
With the implied probability of a September hike climbing from 35% to nearly 60%, the next issue is whether the 10-year Treasury yield can hold above 4.70% and whether the 2-year yield keeps jumping. The report said the market needs at least one full trading day to fully absorb Waller’s hawkish signal.
2. The next stage of the U.S.-Iran confrontation
After the weekend strikes, any further retaliation by Iran or any follow-up military move by the U.S. would hit oil directly and shape wider risk appetite. The report pointed out that Brent had already risen more than 2% in early Monday trading in Asia. If tensions flare again, oil could retest $90 and drive inflation expectations and rate-hike pricing higher.
3. Whether selling pressure in chip stocks can stabilize
The Philadelphia Semiconductor Index dropped 3.47% in one session, and Nvidia’s post-earnings gains narrowed sharply. If chip stocks keep weakening early this week, the report said that would suggest the market’s pricing model is shifting away from an AI growth story and toward a rates-driven valuation story.
Current levels and what the market is watching
The report put the S&P 500 at 7711.76, near the lower end of its trading range since August. It marked resistance near 7800, around the previous high, and support near 7650, close to the mid-August low.
The main question this week is how two forces collide: tightening expectations and geopolitical escalation. If Treasury yields keep climbing while oil rises too, high-valuation tech stocks would get squeezed by both valuation pressure and earnings expectations. If oil pulls back because tensions cool, some of the rate shock that followed Waller’s speech could ease.
The article’s takeaway from Friday was blunt. Waller’s hawkish remarks reset the market’s rate anchor and, for now, shut the door on a valuation rebound in high-multiple technology stocks. At the same time, the U.S.-Iran conflict injected a new geopolitical premium into oil, making the loop between inflation fears and rate expectations even tighter.