Wall Street kicked off September on a downbeat note Tuesday, with major stock indices retreating as climbing crude oil prices reignited investor fears over persistent inflation and tighter future monetary policy. As of 10:51 a.m. Eastern Time, the benchmark S&P 500 fell 0.4%, the Dow Jones Industrial Average dipped 164 points (0.3%), and the tech-heavy Nasdaq composite dropped 0.7%.
This weak opening comes after a generally positive but volatile August, when every major U.S. stock index secured monthly gains. Yet long-running economic anxieties continue to hang over global markets, with concerns over sticky inflation, ballooning government debt and the spillover effects of global geopolitical conflicts weighing heavily on investor sentiment.
Technology stocks bore the brunt of the sell-off, pulling the broader market down due to their outsized market capitalizations. Chipmaking giant Nvidia declined 1.2%, while rival Advanced Micro Devices fell 2.9% amid the downward pull.
A key source of market pressure stems from the ongoing global sell-off in government bonds, which has pushed yields steadily higher. The yield on the 10-year U.S. Treasury note, which heavily influences domestic mortgage rates, climbed to 4.77% from 4.75% at Monday’s close, up sharply from a 2026 starting low of 4.20%. The 2-year Treasury yield, which closely tracks market expectations for Federal Reserve interest rate movements, also ticked up to 4.37% from 4.34%, a substantial rise from its 3.50% level at the start of 2026. Bond yields move inversely to bond prices, and rising yields reflect investor demand for higher returns as sovereign debt risk grows amid expanding national deficit levels. Just two weeks ago, the U.S. national debt crossed the $40 trillion threshold, a milestone that has drawn fresh attention to the country’s unsustainable spending trajectory, where defense costs and interest payments on the growing deficit already account for a massive share of federal outlays. Bond sell-offs are not isolated to the U.S., with sovereign debt facing similar pressure across other major global economies.
Higher bond yields translate to elevated borrowing costs for a wide range of consumer and business loans, from home mortgages to corporate lines of credit. These higher costs dampen overall economic activity, weigh on corporate valuations and discourage business expansion, creating broad headwinds for equity markets.
At the center of the current inflation and yield pressure is the recent surge in global oil prices. International benchmark Brent crude rose 2% to $92.28 per barrel on Tuesday, with costs remaining high and volatile following U.S. military strikes on Iranian sites in the Strait of Hormuz. The strategic waterway is responsible for roughly 20% of global oil shipments, and ongoing conflict has effectively disrupted regular passage through the route.
Surging oil prices have pushed up costs across nearly every sector of the economy, from retail gasoline to freight shipping, sustaining inflation that has continued to squeeze household budgets and corporate profit margins. Current U.S. inflation remains well above 3%, far exceeding the Federal Reserve’s 2% long-term target. The persistently high price environment has fueled expectations that the Fed will implement another interest rate hike before the end of the year to cool price growth. According to CME Group’s FedWatch tool, investors are currently pricing in a 66% probability of a rate increase at the central bank’s upcoming September policy meeting.
The Fed will receive new inflation data ahead of its scheduled meeting, and this week also brings key updates on the state of the U.S. labor market, a key factor influencing the central bank’s policy decisions. On Tuesday, government data showed U.S. job openings rose slightly in July, and the closely watched monthly nonfarm payrolls report for August is set for release on Friday.
Global markets echoed the downward trend on Tuesday: major European stock indices traded lower, while Asian markets finished the session mixed. AP Business Writers Elaine Kurtenbach, Michelle Chapman and Matt Ott contributed reporting to this article.