Wall Street closed lower on Aug 31 as surging crude oil prices reignited inflation concerns and strengthened expectations that the US Federal Reserve (Fed) could raise interest rates as early as September.
According to Reuters, the Dow Jones Industrial Average fell 374.09 points, or 0.7%, to 53,185.90, while the S&P 500 slipped 0.33% to 7,686.14. The Nasdaq Composite edged 0.12% lower to 26,370.89.
Risk appetite weakened as renewed US-Iran hostilities and the continued closure of the Strait of Hormuz pushed energy prices higher, raising concerns that elevated oil costs could spill over into broader inflation. Treasury yields also climbed as investors digested Fed Chair Kevin Warsh’s hawkish Jackson Hole remarks.
Markets are now pricing in more than a 65% probability of a 25-basis-point rate increase at the Fed’s September meeting, according to CME FedWatch, after Warsh signalled policymakers may need to act if inflation fails to move convincingly towards the central bank’s 2% target.
Energy was the strongest-performing S&P 500 sector as crude prices jumped. Halliburton and Valero Energy gained 1.9% each. Utilities lagged, with PG&E plunging 20.1% amid concerns over California wildfire liability legislation.
GameStop rose 2.9% after saying it would fund about 27% of a previously announced US$1.4 billion debt exchange with cash rather than issuing additional shares, reducing potential dilution.
Despite the decline, all three major indexes finished August higher, with the Nasdaq posting the strongest monthly gain as enthusiasm around artificial intelligence remained resilient. The Dow recorded its fifth consecutive monthly advance.
