Stocks Settle Lower as Crude Prices and Bond Yields Surge

The S&P 500 Index ($SPX) (SPY) closed down by -0.45% on Tuesday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down by -0.63%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -0.65%. E-mini S&P futures (ESU26) fell -0.44%, and September E-mini Nasdaq futures (NQU26) fell -0.61%.

Stock indexes settled lower on Tuesday, with the S&P 500 and the Dow Jones Industrials falling to 6-week lows. Stocks are under pressure as elevated crude oil prices raise inflation expectations and push bond yields higher worldwide. Crude prices surged by more than +4% on Tuesday, pushing the 10-year T-note yield to a 19-year high of 5.04%. The 10-year German Bund yield also rose to a 17-year high of 3.57%, and the 10-year Japan JGB yield rose to a 30-year high of 3.04%.

Also, enthusiasm for the AI trade, the major driver of stock gains this year, remains tempered as debate continues over whether the technology may inflict catastrophic harm and whether political pressure for new regulations may slow development. In addition, cryptocurrency-exposed stocks tumbled on Tuesday as Bitcoin fell more than -4% after the Senate blocked a digital asset market structure bill in a procedural vote.

Stock losses were limited as chipmakers and AI-infrastructure stocks recovered some of Monday's sell-off and moved higher. Energy producers also rallied on Tuesday, with crude oil prices up more than +4%.

As a bearish factor, the US Sep Empire manufacturing survey of general business conditions fell -13.0 points to 7.6, weaker than expectations of 15.0.

Weaker-than-expected economic news from China is negative for economic growth prospects and bearish for stocks. China Aug retail sales rose +0.4% y/y, weaker than expectations of +0.8% y/y. Also, the China Aug surveyed jobless rate unexpectedly rose +0.1 to 5.3%, showing a weaker labor market than expectations of no change at 5.2%. In addition, China Aug new home prices fell -0.17% m/m, the thirty-ninth consecutive month home prices have declined. On the positive side, China Aug industrial production rose +5.2% y/y, stronger than expectations of +4.8% y/y.