Stock markets struggling to keep up with rising oil prices and bond yields

Rising oil prices are knocking the U.S. stock market further from its record high on Monday, while building pressure even higher within the U.S. bond market.

The S&P 500 fell 0.8 per cent and gave back most of its gains from last week, which had brought it to the brink of its all-time high. The Dow Jones Industrial Average was down 372 points, or 0.7 per cent, as of 11:45 a.m. Eastern time, and the Nasdaq composite was one per cent lower.

Most of the U.S. stock market sank under the weight of a 2.8 per cent rise for the most actively traded contract in the market for Brent crude oil to US$100.19 per barrel. That overshadowed a gain for Wall Street’s most influential stock, Nvidia, after it announced a historic funneling of cash to its investors through a buyback of its shares.

Meanwhile, the Toronto Stock Exchange was in the red by about 0.75 per cent as many companies tied to mining gold, silver and other commodities struggled. Agnico Eagle Mines was down about 4.5 per cent and Lundin Gold was down roughly 5.5 per cent as of publication.

Oil prices have been yo-yoing on uncertainty about when the war with Iran will allow tankers to flow freely again through the Strait of Hormuz and deliver oil from the Middle East to customers worldwide. The latest turns came after President Donald Trump said over the weekend he’s rejecting an offer from Iran to reopen the Strait of Hormuz and resume talks on its nuclear program.

“I’d like to make a deal, too,” Trump said Saturday. “But that deal would not be acceptable.”

Brent climbed above $101 per barrel Monday morning, before the U.S. stock market opened for trading, but it pared its gains as U.S. officials said mediators were still working with Iran and the United States on a deal to end the fighting and open the strait.

For all its ups and downs, a barrel of Brent remains much higher than the roughly $72 it cost before the United States and Israel attacked Iran in late February. That has helped worsen inflation, and the average price for a gallon of regular gasoline is up to nearly $4.48 from $3.13 a year ago, according to AAA.

Worries about inflation have in turn helped send Treasury yields much higher in the bond market. That pressures the economy because it makes borrowing money more expensive for everyone, while also undercutting prices for stocks and other investments.

The yield on the 10-year Treasury, which is the centerpiece of the bond market, jumped to 5.26 per cent from 5.17 per cent late Friday. That’s a considerable move for the bond market, and the 10-year yield is back to where it was in 2007, before the financial crisis and Great Recession sent yields toward zero.

The 30-year Treasury yield, which leaped to 5.58 per cent from 5.49 per cent, is back to where it was in 2004.

On Wall Street, stocks of airlines and other companies with big fuel bills sank because of the rise in oil prices.

American Airlines fell 3.8 per cent, and United Airlines lost 3.6 per cent.

Gold miners were also weak after the price of gold sank 3.9 per cent. Gold has a reputation for helping to protect its investors from high inflation, but its price tends to weaken when yields are rising and causing bonds to pay their investors more in interest. Gold struggles to keep up because it pays its investors nothing.

Newmont, the Denver-based mining giant, sank 4.4 per cent.

One of Wall Street’s bigger losses hit MongoDB, which dropped 18.5 per cent after the database company said its CEO, Chirantan “CJ” Desai, is stepping down immediately to pursue a senior role at Meta Platforms.

Such losses helped more than offset a two per cent rise for Nvidia. The chip company said it approved a plan to send up to another $150 billion to its shareholders in a stock buyback plan, bringing the program’s total remaining size to $235 billion.

Nvidia has the power to do so after the frenzy around its chips used for artificial-intelligence technology helped it more than double the amount of cash on its books in the first half of its fiscal year. The company also on Monday unveiled a new security platform that the chipmaker said can stop artificial intelligence agents from going rogue.

AI stocks broadly have come under pressure after leaders of the industry said it needs to slow its development to give safety measures time to catch up.

In stock markets abroad, European indexes were mixed following weaker performances across much of Asia.

Indexes dropped 2.7 per cent in Seoul and 1.7 per cent in Shanghai for two of the world’s bigger moves.