US STOCKS-Wall Street dips as spiking crude prices revive fears of inflation, rate hike

U.S. stocks weakened on Monday with ‌markets ​turning the page on a volatile month as a war-related price jump in crude revived inflation fears, raising the likelihood of tighter monetary policy. Spiking oil prices dampened investor risk appetite and sent benchmark U.S. Treasury yields higher as trading opened the session after U.S. Federal Reserve Chair Kevin ‌Warsh struck a hawkish toneon Friday and reaffirmed inflation targets in a keynote speech at the Jackson Hole Symposium.

A broad sell-off sent all three major U.S. stock indexes lower, with rare patches of green from energy shares and semiconductors. All three indexes remain on course to post monthly gains. The Nasdaq showed the largest percentage growth for August as the AI trade remained alive, despite recent weakness. The blue-chip Dow was ‌on track for its fifth consecutive monthly advance.

"August wasn’t about tech," said Paul Nolte chief executive officer at Horizon Investment Services in Hammond, Indiana. "It was really about the rest of the market. ‌You look back in, you know, even over the last couple of months, tech has really kind of struggled to gain footing." Iran's President Masoud Pezeshkian said Tehran is still seeking a negotated solution to the war, after days of increased airstrike exchanges and mounting hostilities following U.S. President Donald Trump's implementation of costly economic sanctions.

The protracted impasse and the related closure of the Strait of Hormuz is fueling fears that upward pressure on energy pricescould metastasize into broader, systemic inflation that could force ⁠the Fed ​to hike interest rates as soon as next month. Financial ⁠markets are currently pricing in a 65.9% likelihood of the central bank implementing 25-basis-point rate hike at the conclusion of September's monetary polity meeting, according to CME's FedWatch tool.

"Investors are revisiting some of the comments that Warsh made at Jackson Hole ⁠as well and what that may mean for interest rates, what that may mean for inflation," Nolte added. "If they do not hike rates in September, I think you will see a dramatic reaction in the markets because ​it's been prepped now for quite some time that they're going to raise rates." The Dow Jones Industrial Average fell 306.71 points, or 0.57%, to 53,253.28, the S&P 500 lost ⁠27.95 points, or 0.36%, to 7,683.81 and the Nasdaq Composite lost 81.08 points, or 0.31%, to 26,321.34.

Among the 11 major sectors in the S&P 500, energy shares , with a boost from surging crude prices , were the biggest gainers, while utilities were one ⁠of the ​biggest laggards on the heels of an amendment to a bill in the Califoria senate, which did little to solve grid operators' exposure to wildfire liabilities. Within the energy space, Halliburton and Valero Energy gained 1.9% and 1.2%, respectively. In utilities, California's PG&E slid 18.2% setting a course for its largest percentage loss in over six years.

Nvidia rose 0.9%, while other chipmakers such as Sandisk and ⁠Qualcomm added 1.2% and 3.4%, respectively. In other movers, GameStop's shares rose 3.4% after the company said it would pay about 27% of a previously announced $1.4 billion debt exchange through cash on hand instead ⁠of issuing new stock, preventing further share dilution.

Declining ⁠issues outnumbered advancers by a 2.16-to-1 ratio on the NYSE. There were 79 new highs and 183 new lows on the NYSE. On the Nasdaq, 1,610 stocks rose and 3,088 fell as declining issues outnumbered advancers by a 1.92-to-1 ratio.

The S&P 500 posted 5 new 52-week highs and 10 ‌new lows while the Nasdaq Composite ‌recorded 31 new highs and 134 new lows.