Stocks fell Monday alongside rising bond yields and erratic oil trading as geopolitical upheaval remained top of mind for traders.
The S&P 500 fell 0.5% and the Nasdaq Composite fell 0.6% as oil prices edged higher, pushing Brent crude oil above $105 a barrel.
Earlier in the day, Brent rose above $108, but that rise was halted after reports that mediators planned to meet separately with U.S. and Iranian officials to discuss the ongoing impasse between the two sides over the war with Iran. Iran’s semi-official ISNA news agency downplayed the significance of the meetings, saying Iranian Foreign Minister Abbas Araghchi would attend negotiations with the mediators but that no U.S. representatives would be present.
Other reports throughout the day that Trump was willing to offer economic concessions to Iran in order to restart negotiations and reach a deal also eased some of the pressure on oil prices. NBC News has not confirmed these reports.
Over the weekend, President Donald Trump said he rejected a recent proposal from Iran to reopen the Strait of Hormuz, through which critical energy supplies passed before the war.
“They want to make a deal, and I think that’s great,” Trump told reporters in Washington. “I also like to make a deal, but … this deal would not be acceptable.”
Monday’s rough oil trading is a familiar feature of this year’s market turmoil.
Bond yields also hit new multi-year highs.
The 10-year U.S. Treasury yield rose to 5.27%, its highest level since mid-June 2007. A wide range of other Treasuries also continued to trade above 5%, and the 30-year bond yield hit its highest level since May 2004.
The 2-year Treasury note, which is often seen as a signal of the direction the market expects central bank rates to take, rose to its highest level since 2024.
Concern among market observers has increased as bond yields have risen.
“The significant rise in oil prices so far this year has not taken the wind out of the global economy,” longtime market analyst Ed Yardeni wrote Saturday. “The question is whether the rapid rise in interest rates will have a positive effect. »
“Unfortunately, these higher rates also exacerbate the prospects of large government deficits around the world,” wrote Yardeni, president of Yardeni Research.
Still, stocks have remained largely resilient in the face of rising inflation driven by rising oil prices and bond yields continuing to rise.
That’s partly because “financial conditions have changed little” since January, Goldman Sachs analysts said. They added that “the substantial rise in interest rates was almost offset by the effects of rising stock prices.”
But the stock market’s rise this year has been mainly driven by just a few sectors, worrying some analysts.
For the year so far, the S&P 500 is up just over 12%. But a look under the hood reveals a different story. The information technology sector is up 28% this year, and the energy sector is up 38%.
The financials, real estate, utilities, consumer staples, consumer discretionary and communications services sectors all gained less than 10%.
The healthcare, industrials and materials sectors are up 10%.
In addition to rising oil prices, rising bond yields and geopolitical headlines that could swing stocks one way or the other at any time, the end of the month will feature important central bank meetings, including at the Federal Reserve, where rates could rise further.
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