U.S. stock indexes fell on Tuesday as rising crude oil pushed inflation expectations higher and weighed on rate-sensitive sectors. The S&P 500 edged down 0.66% to a 4-week low, the Dow Jones Industrial Average declined 0.43%, and the Nasdaq 100 fell 1.30%—with investors also reacting to a bond selloff that lifted yields to multi-year highs.
Oil prices climbed after Middle East developments intensified, while bond market pressure broadened as government yields rose across major economies. Despite the weakness, some investors pointed to ongoing earnings momentum, including strong quarterly results across much of the S&P 500 and expectations for AI-related spending to drive a large share of near-term earnings growth.
Key takeaways
- Price move: The S&P 500 fell 0.66%, the Dow slipped 0.43%, and the Nasdaq 100 dropped 1.30%.
- Catalyst: Higher oil prices and a global bond selloff lifted yields, pressuring growth and AI-infrastructure stocks.
- Market implication: With yields at multi-year highs, investors appear to be repricing the path of central-bank policy even as earnings season supports stocks.
- Geopolitics factor: Escalating tension around the Strait of Hormuz helped push crude higher and added to inflation sensitivity.
What drove the selloff
Stocks traded lower as the combination of firmer oil prices and rising yields reinforced concerns about persistent inflation. The article attributed the equity pressure to higher oil prices boosting inflation expectations and to growing expectations that central banks will keep tightening policy.
Bond yields rose broadly, according to the report, with the UK 10-year gilt reaching an 18-year high of 5.25%, Germany’s 10-year bund jumping to a 15-year high of 3.36%, and Japan’s 10-year JGB climbing to a 30-year high of 3.00%. In the U.S., the 10-year Treasury note was described as reaching a 1.75-year high of 4.80%.
U.S. E-mini futures also reflected the risk-off tone, with E-mini S&P futures down 0.66% and September E-mini Nasdaq futures down 1.26%, consistent with investors favoring yield-bearing assets while trimming longer-duration equities.
Oil’s surge and its inflation ripple
Crude oil futures rose sharply, with October WTI crude up more than 2% to a 6-week high, according to the report. The move was linked to escalating hostilities in the Middle East. The article cited incidents involving two oil supertankers being struck while attempting to exit the Strait of Hormuz, along with U.S. action targeting Iranian rocket launchers and an Iranian retaliation that included missiles and drones aimed at U.S. air bases in Jordan. It also referenced a report that the UAE intercepted drones from Iran and said President Trump was weighing limited strikes to deter Iran from reconstituting radar and missile capabilities to attack ships in the Strait of Hormuz, according to Axios.
Higher energy prices matter for equities not only through consumer costs, but also through how they feed into expectations for interest rates. The report noted that today’s crude rally coincided with a renewed upward pressure on yields, which tends to weigh on companies whose valuations are sensitive to discount rates.
Earnings support, but yields kept control of the tape
While bonds and oil pushed stocks lower, earnings expectations provided a counterweight. The article said S&P 500 earnings growth for the second quarter was tracking at nearly 32%, above an estimate of 23% and supported by projections that AI spending would account for a large portion of earnings. It added that AI infrastructure stocks were expected to contribute nearly 60% of the S&P 500’s earnings-per-share growth in the quarter.
The report also cited early earnings results: 86% of 486 S&P 500 companies that had reported second-quarter results beat estimates, based on Bloomberg data. Even with this backdrop, investors appeared to prioritize the near-term macro signal from the bond market.
Rate expectations remained central. The article stated markets were discounting a 65% chance of a 25 basis-point rate hike at the next FOMC meeting on September 15–16.
Which parts of the market were hit
The yield-driven selloff showed up most clearly in technology tied to AI infrastructure. The report said chipmakers and AI-related stocks retreated as bond yields surged, with Qualcomm down more than 4%. It also cited declines of more than 3% in Marvel Technology and Intel, and drops of more than 2% across a group including Advanced Micro Devices, Applied Materials, Analog Devices, Lam Research, Microchip Technology, NXP Semiconductors, Broadcom, KLA, Micron Technology, and Texas Instruments. Nvidia was also reported down more than 2% to lead decliners in the Dow.
Mining stocks also weakened, the article said, as gold, silver, and copper prices slid. Crypto-related equities were broadly lower, with Bitcoin down more than 1% and several companies in the sector reporting sharp declines. Cybersecurity names were mixed-to-lower, while defensive health insurance stocks were among the gainers, including Elevance Health, Centene, Humana, Cardinal Health, and CVS Health, alongside UnitedHealth and Cigna.
Bigger picture: Europe data and policy expectations
In Europe, the report highlighted a mix of inflation and activity signals that continued to support the view that central banks may stay hawkish. It said Eurozone August CPI rose 3.3% year over year, with core CPI up 2.4% year over year. The article also cited an unchanged Eurozone unemployment rate at 6.4% and a slightly weaker manufacturing backdrop, with the Eurozone S&P manufacturing PMI revised down to 52.7.
For individual countries, German retail sales fell 3.4% month over month, while the UK manufacturing PMI was revised slightly higher. The report included comments from ECB Governing Council member Martin Kocher suggesting upside risks to inflation had increased and that another rate hike could be necessary if confirmed by the ECB’s new forecast. It added that markets were discounting a 98% probability of a 25 basis-point ECB hike at the September 10 meeting.
What to watch next
Investors are likely to stay focused on the interaction between oil, inflation expectations, and the bond market. With the report pointing to yields driving equity performance, attention next may turn to upcoming U.S. economic data and further central-bank guidance, alongside the next wave of scheduled earnings reports. According to the article, additional earnings expected on 9/1/2026 include Credo Technology Group Holding, Dell Technologies, Gitlab, Medtronic, MongoDB, and Palo Alto Networks.
