The S&P 500 turned lower Tuesday, giving up an early advance, as fading hopes for a Strait of Hormuz reopening deepened doubts over a broader U.S.-Iran resolution. Oil prices climbed as Iran repeated its conditions for reopening the waterway, while investors turned to this week's inflation data for clues on the Federal Reserve's next move.
Early gains reverse as Hormuz hopes fade
The S&P 500 opened Tuesday's session up 0.1%. The Nasdaq Composite advanced 0.3%. The Dow Jones Industrial Average rose 117 points, or 0.2%. But the advance reversed as the session wore on: the S&P 500 traded down 0.1%. The Nasdaq Composite fell 0.4%. The Dow shed 42 points, or 0.1%.
The reversal came as hopes among investors that the Strait of Hormuz would reopen faltered, exacerbating lingering doubts that the U.S. and Iran can reach a broader resolution to the conflict. The secretary of Iran's Supreme National Security Council reiterated that the strait would not reopen until its conditions have been met.
Oil rises as Iran hardens its stance
U.S. West Texas Intermediate futures were last up 1% at above $83 a barrel, while international benchmark Brent crude also gained 1% to above $88 a barrel. Iranian Foreign Minister Abbas Araghchi said earlier this week there was "no possibility of restarting negotiations" as long as the U.S. continues violating the June memorandum of understanding and does not compensate Iran for those violations, according to the semi-official Tasnim News Agency.
Inflation data could test the Fed
Investors will next turn to a key batch of inflation data. The July consumer price report is due Wednesday. The producer price index is out Thursday. The readings could prove particularly important after a weak jobs report complicated the Fed's outlook.
Higher oil prices are renewing concerns about price pressures just as the sharp slowdown in hiring raises questions about the strength of consumer spending and the broader economy. Dennis Follmer, chief investment officer at Montis Financial, said he expects the CPI report to continue its downward trend, which would support the case for the Fed to hold rates steady rather than hike them. He added that services inflation could remain a sticky problem, though that sector is not very sensitive to interest rates.
Source: US Top News and Analysis
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