Financial Markets                      08/31 15:22

   

   Oil prices rose and U.S. stocks fell after American forces struck Iranian 
rocket launchers on the Strait of Hormuz, marking the first military action in 
a month. Brent crude rose 2.7% Monday, closing back above $90 a barrel. The S&P 
500 fell 0.3%, the Dow Jones Industrial Average dropped 374 points, or 0.7%, 
and the Nasdaq slipped 0.1%. Still, all three indexes closed with gains for the 
month of August. The yield on the 10-year Treasury rose to 4.75%, around the 
level seen two weeks ago when the Trump administration took the unusual step of 
announcing it would intervene in the bond market.

   THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.

   The price of oil rose and stocks fell on Wall Street Monday after the U.S. 
launched its first military action in a month against Iran.

   The S&P 500 index fell 0.5%. The Dow Jones Industrial Average fell 331 
points, or 0.6%, as of 3:01 p.m. Eastern time. The Nasdaq fell 0.4%.

   The indexes are on pace to close out August with a gain for the month after 
the S&P 500 and Nasdaq each lost ground in July and June.

   Monday's losses were broad, with nearly every sector within the benchmark 
S&P 500 in the red. Energy stocks, though, gained ground. Exxon Mobil rose 2.1% 
and Chevron rose 1.5%.

   On the losing side, Edison International slumped 23.4% and PG&E fell 19.5% 
for two of the steepest declines. That followed reports about potential 
California wildfire legislation that would allow insurers to sue utilities over 
related claims.

   Amazon fell 2.9% after The Wall Street Journal reported that the Federal 
Trade Commission and more than 20 states are preparing to sue Amazon.com over 
claims the online retail giant manipulated prices on its platform.

   The U.S. war with Iran remained a key focus for Wall Street. U.S. forces 
struck Iranian rocket launchers on the Strait of Hormuz on Sunday. Meanwhile, 
the United Arab Emirates said it intercepted an Iranian drone over its waters 
on Monday.

   The aggressive actions follow a lull in activity in the U.S. war with Iran, 
which has lasted more than six months.

   The war has curtailed traffic in the Strait of Hormuz, which accounts for 
about 20% of the world's oil shipments. Oil prices remain high after an initial 
surge earlier in the war and that has made everything from gasoline to shipped 
goods more expensive.

   The price of Brent crude, the international standard, rose 2.7% to settle at 
$90.49 per barrel on Monday. The price swung between $72 and $102 last month 
amid rising and falling hopes for a deal to end the war.

   The national average for gasoline in August has been above $4 per gallon 
every day of the month for the first time ever, according to the AAA. It has 
been the most expensive August at the pump on record, outpacing even the 
enormous supply chain crunch during the COVID-19 pandemic in 2022.

   Higher energy prices because of the war have fueled already stubbornly high 
inflation. That has been weighing on household spending and consumer 
confidence. It has also given the Federal Reserve a more complicated path ahead 
for its interest rate policy.

   The rate of inflation remains well above 3%, which is far beyond the Fed's 
2% target. Wall Street expects the central bank to raise interest rates at 
least once before the year ends in an effort to cool inflation. On Friday, Fed 
Chair Kevin Warsh said that inflation is still too high and suggested a rate 
hike might be necessary in the coming months.

   The Fed gets its next inflation update on Sept. 11, just days ahead of its 
next meeting to determine interest rate policy. Wall Street is forecasting a 
66% chance that the Fed will raise its benchmark rate at that meeting, 
according to CME FedWatch.

   "While a September hike is not a foregone conclusion, we expect the Fed to 
have limited tolerance for meaningful upside inflation surprises," wrote Brock 
Weimer, investment strategy analyst at Edward Jones, in a research note.

   The yield on the two-year Treasury, which closely tracks expectations about 
Fed moves, rose to 4.35% from 4.34% late Friday. That's up significantly from 
about 3.50% at the beginning of 2026.

   The yield on the 10-year Treasury rose to 4.76% from 4.73% late Friday. 
That's back up around the level seen two weeks ago when the Trump 
administration took the unusual step of announcing it would intervene in the 
bond market.

   The job market remains resilient, but is showing signs of weakening. Any 
increase to interest rates that could cool inflation also risks hurting the 
jobs market.

   Later this week, the U.S. reports August jobs data. In July, the U.S. job 
market stalled unexpectedly as employers cut 23,000 jobs. Labor Department 
revisions slashed another 103,000 jobs from May and June payrolls.

   Company updates helped move several stocks Monday. GameStop rose 2.5% after 
the video game retailer provided a preliminary second-quarter earnings outlook 
above its year-ago results. Shares of Aon slid 8.6% as the company announced 
that it was buying insurance broker USI Insurance Services from private equity 
firm KKR in a deal valued at $17 billion, including debt.

   Markets were mixed in Europe and Asia.

   ___

   AP Business Writers Elaine Kurtenbach and Michelle Chapman contributed to 
this report.

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