Dow opens 150 points lower as oil gains pressure stocks

The Dow Jones Industrial Average opened 150 points lower Tuesday as stalled US-Iran negotiations pushed oil prices higher and elevated Treasury yields pressured technology and semiconductor shares.

"This points to a material slowdown in real consumer spending growth in the third quarter," Sal Guatieri, senior economist at BMO Capital Markets, said after July retail sales fell 0.6 percent against a 0.1 percent gain forecast.

The blue-chip index slipped about 0.4 percent in early trading, extending Friday's 107.58-point drop to 53,732.41. The S&P 500 and Nasdaq Composite also opened lower, with semiconductor names leading the decline as the 10-year Treasury yield held near 4.69 percent, up five basis points on the week. Brent crude climbed 6 percent to $88.52 a barrel after only 13 vessels crossed the Strait of Hormuz on Thursday, versus more than 130 a day before the war began.

The combination of rising oil and sticky yields creates a stagflationary squeeze on growth valuations. With the Federal Reserve's July meeting minutes due Wednesday and markets pricing a 67 percent chance of no September rate change, the next test of direction arrives within days.

Oil's 6% Weekly Jump Tightens the Squeeze

The crude rally is the sharpest transmission of the Iran standoff into equities. Brent settled at $88.52 a barrel Friday, up 6 percent for the week, while West Texas Intermediate added 5.4 percent. US crude closed at $82.40, up 1.4 percent on the day. Kpler data cited by the Wall Street Journal showed just 13 vessels transited the Strait of Hormuz on Thursday, down from more than 130 before the conflict, as global oil inventories are drawn down.

Energy was the only sector to hold gains Friday, with Chevron advancing 1.16 percent to $200.00. The S&P 500 energy sector rose 1.4 percent even as the broad index slipped 0.17 percent to 7,785.76.

Yields Hold Near 4.69% as Inflation Persists

The 10-year Treasury yield climbed five basis points Friday to 4.68 percent and held near that level into Tuesday's open. The move matters because weaker spending did not produce lower long rates — oil-driven inflation risk and heavy financing demand kept term pressure elevated. The Treasury sold $25 billion of 30-year bonds at a 5.216 percent yield last week, the highest since 2001, with a bid-to-cover ratio of 2.39.

The two-year yield rose two basis points to 4.17 percent. Markets ended Friday pricing a 67 percent chance the Fed holds rates steady in September, against a 30.6 percent probability of a hike.

Tech and Semiconductors Bear the Brunt

Higher discount rates hit the longest-duration equities hardest. Semiconductor and technology names led the early decline Tuesday, with the Nasdaq Composite — which closed Friday at 26,729.16, down 0.3 percent — underperforming the Dow. The S&P 500's Shiller CAPE ratio near 40-42, levels last seen around the 2000 dot-com peak, leaves growth multiples with little cushion against rising yields.

The VIX finished Friday at 14.56, near its 2026 low, even as the Cboe SKEW Index gained 6.6 percent since July — a sign traders are paying up for tail-risk protection despite the muted headline volatility.

What's Next

The Federal Reserve releases minutes from its July meeting Wednesday. Housing starts and industrial production land Tuesday, and the second-quarter advance services report follows Thursday. Each will test whether the rotation out of large-cap growth into small caps — the Russell 2000 gained 1.1 percent last week against the Dow's 0.6 percent loss — reflects a durable broadening or a defensive retreat.

This article is for informational purposes only and does not constitute investment advice.