US stocks opened lower on Monday as rising oil prices and expectations of a tougher Federal Reserve stance on interest rates weighed on investors.
The Dow Jones Industrial Average fell 97.4 points, or 0.18 per cent, to 53,462.6 at the open. The S&P 500 dropped 0.18 per cent to 7,697.52, while the Nasdaq Composite slipped 0.17 per cent to 26,358.56.
Oil prices climbed after military strikes between the United States and Iran, reviving concerns that higher energy costs could add to inflationary pressure and make it harder for the Fed to lower borrowing costs.
Investors were also continuing to assess comments from Fed chair Kevin Warsh, who warned at the central bank’s Jackson Hole symposium that policymakers may need to raise interest rates if inflation does not fall towards the Fed’s 2 per cent target.
Markets are now pricing in a more than 60 per cent chance of a rate increase at the Fed’s September meeting, according to CME’s FedWatch tool. That compares with a probability of 41.4 per cent a week earlier.
“He took any chance of a (rate) cut off the table,” said Thomas Kikis, head of markets for the US and Americas at Standard Chartered.
The shift in expectations comes ahead of the next US employment report, due on September 4, which could help determine whether the Fed tightens policy next month.
Energy shares gained as oil prices rose, but every other sector in the S&P 500 fell. Utilities were among the weakest performers, while Nvidia and several other chipmakers were more resilient.
The market’s declines came despite the S&P 500 and Nasdaq remaining on course for monthly gains after two consecutive months of losses. The Dow was heading for its fifth successive monthly rise.
