U.S. stocks drifted lower on Tuesday after an Iranian official said the Strait of Hormuz would stay closed until Tehran's conditions are met, pushing oil prices back up. Traders are now waiting on Wednesday's CPI report, the next catalyst after a weak July jobs print clouded the outlook.
At 12:37 ET on Tuesday, the S&P 500 fell 0.1% to 7,742.45 points, the Nasdaq Composite dropped 0.4% to 26,500.61 points, and the Dow Jones Industrial Average slipped 0.1% to 53,902.85 points. Traders are largely on the sidelines, with the next catalyst likely to be inflation data due over the following two days.
Hormuz standoff keeps oil bid
Wall Street had already retreated on Monday as oil prices surged about 5% amid mounting uncertainty over a deal to reopen the strait. Washington and Tehran are trading conflicting claims over its status: the U.S. insists it remains open to commercial shipping, while Iran calls it effectively shut. Iran has been negotiating with Oman on a framework to manage the waterway, and Qatar's foreign ministry spokesperson said talks between the two countries are at an advanced, critical stage.
According to Investing.com, Mohammad Mokhber, an advisor to Iran's Supreme Leader Mojtaba Khamenei, said on social media Tuesday that "the Strait of Hormuz will not be opened until Iran's conditions are met." Iran has tied any reopening to the U.S. meeting terms from a June interim peace deal that later collapsed, including lifting the American naval blockade, removing sanctions, and compensation for war damage; Trump countered Monday with his own compensation demands. Shipping tracker Kpler recorded confirmed vessel crossings falling from 15 on Friday to just six on Sunday.
Oil ticked up again on Tuesday after the Iranian official's comment, with Brent crude rising 0.8% to $88.45 a barrel and WTI crude adding 1% to $82.94 a barrel.
Earnings keep the rally intact
Away from the Middle East, markets are still digesting last week's rally, which pushed Wall Street back to a record high for the first time since early June. A slide in oil prices, sector rotation out of technology stocks and a solid earnings season have all buoyed the market.
Of the 436 S&P 500 companies that had reported earnings by Friday, 85.1% beat analyst expectations, well above the long-term average of 67%, according to LSEG I/B/E/S data. Jefferies noted that large-cap earnings growth is running at its highest since 2021. Dennis Follmer, chief investment officer at Montis Financial, said earnings have driven the market higher since the March lows and urged investors to look beyond the S&P 500 and the Magnificent Seven toward midcap, small-cap and international stocks.
On single-stock moves, Sea shares soared more than 13% after the Singapore-based tech group beat quarterly revenue estimates. Tencent Music shares slid more than 11%, however, after a bottom-line miss.
CPI looms as the next test
The spotlight now shifts to Wednesday's U.S. consumer price index report for July, a fresh test of Federal Reserve policy expectations. The data carries extra weight after the U.S. unexpectedly shed 23,000 jobs in July, with the prior two months' payrolls revised sharply lower, suggesting the labor market may be weaker than initially thought.
A renewed rise in energy prices could complicate that picture. In theory, higher interest rates can help corral inflation, albeit at the risk of weighing on both the labor market and broader growth. Henry Allen, macro strategist at Deutsche Bank, said markets are currently pricing a benign scenario of steady growth, only modest rate hikes and fading supply shocks — one he warned leaves little cushion if any of those assumptions breaks.
Source: All News
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