U.S. stock indices closed lower under pressure from oil prices

U.S. stock indices closed lower on August 17 (S&P500: -0.52%), amid a continued rise in long-term Treasury yields and higher oil prices.

Signs of negative momentum were evident from the start of the session, but selling intensified when, in the second half of trading, geopolitical concerns pushed oil prices higher. Prospects for a peaceful settlement suffered another blow after U.S. President Donald Trump said he was not interested in extending the expiring memorandum of understanding with Iran, while hostilities flared up again in Lebanon.

The rise in oil prices meant the energy sector was the only one in the S&P500 to finish the session in positive territory, offsetting the strong performance shown during the session by semiconductor makers. Shares of chip and memory manufacturers, including Sandisk, Marvell and Micron, were among the top gainers. SpaceX shares rose after a series of disclosures demonstrated the scale of investments by institutional investors and technology companies in Elon Musk’s company. Nvidia reported that it owns nearly 123 million shares of SpaceX, while Google has a 7.2% stake. Homebuilders faced additional pressure from higher long-term Treasury yields after the 30-year yield hit a new 19-year high during the session.

The 2-year yield rose 1 bp to 4.18%, the 10-year yield rose 3 bps to 4.72%, and the 30-year yield rose 4 bps to 5.31%. The U.S. dollar rebounded from a more-than-two-month low but remained in negative territory amid reduced expectations of an imminent Fed rate hike. The euro, in turn, edged up slightly to $1.158 (+0.05%). 

Oil prices climbed amid a U.S.-Iran struggle for control of the Strait of Hormuz. Gains accelerated after Iranian state media reported the seizure of an oil tanker from the UAE in the strait. The U.S. continues its blockade of Iranian ports: according to U.S. Central Command (Centcom), to date U.S. forces have “rerouted 64 commercial vessels, disabled 3, and conducted inspections of 2 vessels in order to ensure compliance.”
September WTI crude futures closed at $84.46 per barrel (+2.5%).