Dow futures dropped 308 points to open a holiday-shortened week, while oil prices jumped after Iran and the U.S. exchanged strikes over the weekend. Rising crude is pushing Treasury yields higher just as traders weigh the odds of a Fed rate hike and brace for new U.S.-Canada tariffs.
Dow Jones Industrial Average futures fell 308 points, or 0.6%, as trading resumed after the Labor Day holiday. S&P 500 futures slipped 0.2%, but Nasdaq-100 futures bucked the trend, rising 0.1%. Wall Street is watching the Middle East war and rising trade tensions between Canada and the U.S.
Oil's surge pressures yields
Oil prices jumped to six-week highs after Iran and the U.S. traded strikes over the weekend. Brent crude traded 1.1% higher at $97.31 a barrel, while West Texas Intermediate futures climbed 1.3% to $92.66. Crude has surged over the past month as the U.S.-Iran war continues, and that is putting upward pressure on Treasury yields as traders worry higher energy prices will push inflation higher.
As a result, the benchmark 10-year Treasury yield last week climbed to its highest level since November 2023, while the 2-year yield scaled to a January 2025 high. Ed Yardeni, president of Yardeni Research, said bond yields are rising worldwide, and the question is whether that reflects stronger growth, higher-than-expected inflation, or looming fiscal debt crises.
Fed decision looms, tariffs take effect
The Fed holds its policy meeting next week. Traders are pricing in a 60% chance the central bank will hike rates by a quarter-percentage point, according to CME Group's FedWatch tool. Those odds could shift this week, with wholesale and consumer inflation data due Thursday and Friday, and with any fresh jump in oil prices as Middle East tensions continue to rise.
Traders also face renewed trade friction between the U.S. and Canada. Retaliatory tariffs from Canada on about $20 billion of U.S. goods take effect on Tuesday. Ahead of the new duties, President Donald Trump said Canadian aircraft manufacturer Bombardier can't sell in the U.S. unless it builds its products there, writing on Truth Social: "NO MORE SELLING BOMBARDIER IN THE UNITED STATES!"
Source: CNBC
Trading involves risk.
Risk Disclaimer
