Oil prices jump back to where they were in May and weigh on Wall Street
NEW YORK (AP) — Oil prices are climbing again Thursday and are back to where they were before the summer as the war with Iran keeps clogging the global flow of crude. That’s worsening worries about inflation and cranking up pressure within the bond market, helping to send stocks lower again on Wall Street.
The S&P 500 fell 0.6% and is on track for a fourth straight loss, though it’s not far from its all-time high set last month. The Dow Jones Industrial Average was down 153 points, or 0.3%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.9% lower.
Stocks sank under the weight of rising oil prices. Brent crude, the international standard, climbed another 4% and got back above $105 per barrel for the first time since May.
The price for a barrel of benchmark U.S. crude rose 3.8% and at one point topped the $100 level for the first time since before Memorial Day.
Oil prices have been jumping since early July, when Brent crude was going for less than $72 per barrel, as hopes fade that the United States and Iran may reach a deal soon to fully reopen the Strait of Hormuz and allow oil tankers to freely exit the Persian Gulf. President Donald Trump said on Wednesday that oil prices likely won’t come down until after the U.S. midterm elections in November.
The jump has pushed the price of a gallon of regular gasoline to an average of nearly $4.28 across the United States, according to AAA. That’s up nearly 34% from a year earlier and is not only costing people more at the pump but also through higher prices for all kinds of products that move by truck to store shelves.
A report on Thursday showed that inflation at the U.S. wholesale level accelerated to 5.4% last month from 4.8% in July. Retailers could eventually pass such increases in prices onto shoppers. A report is coming on Friday that will show how much inflation U.S. consumers are feeling.
The typical move to rein in high inflation is for the Federal Reserve to raise its main interest rate, the federal funds rate. Such a move then filters out through the rest of the bond market, makes it more expensive for U.S. households and businesses to borrow money, slows the overall economy and undercuts prices for investments to hopefully starve inflation of its fuel.
A report on Thursday suggested the U.S. job market may still remain solid, as fewer workers applied for unemployment benefits last week.
Following Thursday’s data reports, traders are betting on a 70% chance the Fed will raise the federal funds rate at its next meeting next week. That’s up from the 61% chance seen the day before, according to data from CME Group. That’s also despite Trump’s consistent lobbying for interest rates to go lower rather than higher.
The Fed’s counterpart in Europe, the European Central Bank, raised its own interest rates on Thursday in hopes of getting inflation in check. It cited “the conflict in the Middle East” and how it “continues to generate inflation pressures.”
It all pushed the yield on the 10-year Treasury up to 4.91% from 4.83% late Wednesday, which is a significant move for the bond market. It’s up from just 3.97% before the war with Iran began, and it’s back to where it was in the autumn of 2023 after the Fed had cranked the federal funds rate higher following the COVID pandemic.
Higher yields mean investors can make more money from parking their money in bonds, which can make them less willing to pay high prices for stocks and other riskier investments.
Macy’s fell 2.7% even though the retailer reported stronger profit and revenue for the latest quarter than analysts expected. It also raised its forecasts for earnings and other financial measures for its fiscal year, but it warned that "there are macroeconomic and geopolitical factors that could influence” how much its customers feel comfortable spending.
Macy’s said it received $116 million in tariff refunds from the government — $98 million during the quarter and another $18 million after the quarter ended. Macy’s CEO Tony Spring told The Associated Press Thursday that it’s using some of the proceeds to lower prices on certain items like furniture and other big-ticket purchases.
In stock markets abroad, indexes slipped across much of Europe and Asia. Hong Kong’s Hang Seng dropped 1.3% for one of the world’s biggest moves.
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AP Business Writers Anne D’Innocenzio and Elaine Kurtenbach contributed to this report.
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