US stocks turned lower Tuesday after Iran said the Strait of Hormuz would remain closed until its conditions were met, pushing oil prices higher.
The S&P 500 was trading 0.3% lower as of 2:08 p.m. in New York, erasing earlier gains as Brent crude oil bounced above $88 per barrel. Energy, utilities, and industrial stocks were all higher, while large-cap technology shares were the biggest drag on the index. The technology-heavy Nasdaq 100 declined 0.4%.
Nationwide Funds Group Chief Strategist Mark Hackett said lack of progress on a peace deal in Iran and rising oil prices put “some modest pressure” on stocks “but relative to last week’s rally, investors are taking the news in relative stride.”
Tuesday’s choppy trading comes ahead of closely watched consumer and producer price data that will help assess the probability of a Federal Reserve interest rate hike in September. The recent rise in oil prices has markets pricing back a nearly 50% chance of a rate hike, according to data compiled by Bloomberg.
Analysts remain split on the near-term outlook for inflation and rates. Douglas Beath, global equity strategist at Wells Fargo Investment Institute, cautions that “elevated refined energy product prices and some increasing stickiness in core services – especially rents and medical care – make a less sanguine near-term inflation outlook.”
