Wall Street rises as falling oil prices ease inflation worries

Wall Street rose at the start of the week as falling oil prices and lower Treasury yields eased lingering worries that inflation could potentially get even worse. The rally was anchored by a modest gain in the S&P 500, a modest lift in the Nasdaq composite, and a six-hundred-plus-point jump in the Dow Jones Industrial Average, which finished at a record close.

Brent crude, the international standard, fell 5.1% to $83.42 per barrel, or according to another figure fell $4.27 or 4.9% to $83.66 per barrel. U.S. Benchmark crude lost $4.86, or 5.8%, to $79.81 per barrel. Those moves followed President Donald Trump’s weekend statement that he would order U.S. Forces to refrain from attacks against Iran at the urging of allies in the region, and that a deal to end the fighting was near. President Trump also stated that talks with Iran on reopening the Strait of Hormuz would take place on Monday, though Tehran disputed his claim. Just a day prior to saying he would order the military to pull back on the aggression, the president remarked that he was losing faith in the negotiations with Iran, warning that the U.S. Military would be hitting them very hard.

The retreat in oil prices was just the latest of many big swings since the U.S. And Israel attacked Iran in late February. On-and-off fighting and comments from President Trump about which way the conflict was heading have served as the major drivers of rising and falling oil prices. In the immediate aftermath of the de-escalation signs, U.S. Equity futures rallied ahead of the opening bell. Dow futures climbed 466 points, or 0.89%, S&P 500 futures gained 40.25 points, or 0.54%, and Nasdaq 100 futures rose 80.5 points, or 0.28%, as of 7:15 a.m. ET. The two-year Treasury yield dropped 5.4 basis points as investors weighed the economic impact of elevated energy costs since the conflict began.

Even as the broad market turned upbeat, several major chip stocks continued to face downward pressure. Micron Technology shares fell 3.2% after a report indicated that CXMT was considering a second memory-chip facility in Beijing and discussing financing with a local government-backed technology manufacturing hub. Advanced Micro Devices also slid alongside Micron in a market where AI-linked stocks remained in focus as Palantir, Advanced Micro Devices, SanDisk, and Western Digital prepared to report results. Beyond the technology sector, healthcare stocks drew attention following a report that Bristol Myers Squibb and AstraZeneca had held preliminary merger discussions that could create one of the world's largest drugmakers, valued at nearly $400 billion. Bristol Myers shares rose 6% in premarket trading, while AstraZeneca fell 5%.

Asian markets painted a mixed picture. Japan’s Nikkei 225 index lost 0.9% to 63,754.90, while South Korea’s Kospi dropped 5.1% to 6,257.45. The Kospi had previously soared 17.9% for its best day in history after losing even more of its value earlier in the week, driven by tech giants Samsung Electronics and SK Hynix whose shares had gained more than 25% before falling 8.8% on Monday. Hong Kong’s Hang Seng index picked up 0.5% to 26,009.40 and the Shanghai Composite index lost 0.6% to 3,809.66. The drop in Japanese equities coincided with the U.S. Dollar dipping against the yen after the U.S. And Japan confirmed they had acted to prop up the value of the Japanese yen against the dollar. The dollar fell to 155.20 early Monday in Tokyo after recently reaching 40-year highs near 164 yen. The U.S. Treasury bought yen through the Federal Reserve Bank of New York to help boost its value.

"Washington is no longer merely giving Tokyo permission to defend the yen. It is prepared to stand on the same side of the trade,"

Stephen Innes, SPI Asset Management, via Castanet

A weak yen helps boost profits for Japanese companies with big operations overseas and draws foreign tourists, but it also weakens purchasing power and pushes up costs for imported oil and other essential goods. In Europe, Germany’s DAX gained 1.5%, the CAC 40 in Paris climbed 1.1%, and Britain’s FTSE 100 inched up 0.2%.

Financial markets are bracing for a busy schedule ahead. This week brings a slew of U.S. Labor market data, highlighted by the government’s July jobs report on Friday. Earnings season is also in high gear with dozens of major companies reporting their latest profits, including Palantir, SpaceX, McDonald’s, The Walt Disney Co., and Uber, among others.