Wall Street endured its longest losing streak since June as rising energy costs and inflation concerns weighed heavily on investors, according to reporting from idahopress.com.
The S&P 500 dropped 0.6% on Thursday, marking the fourth consecutive day of declines. The Dow Jones Industrial Average fell 316 points, or 0.6%, while the Nasdaq composite slipped 0.7%. The sell-off was driven largely by a sharp increase in global oil prices, which have returned to levels not seen since May.
Energy Costs Spike Amid Middle East Conflict
Brent crude prices surged 6.3% to settle at $107.63 per barrel, briefly touching $108 earlier in the day. This marks a significant jump from early July, when Brent crude traded for less than $72. The price increase is attributed to disruptions in global crude flow caused by the ongoing war with Iran.
The spike in oil prices has immediate implications for consumers at the pump. AAA reported that the average price for a gallon of regular gasoline in the U.S. reached nearly $4.28. This represents a year-over-year increase of nearly 34%.
President Donald Trump addressed the energy market volatility, stating that oil prices likely will not drop until after the November U.S. midterm elections. His comments underscored the political sensitivity of energy costs heading into the election cycle.
Inflation Pressures Mount
Rising energy costs are feeding into broader inflation metrics. U.S. wholesale inflation accelerated to 5.4% last month, up from 4.8% in July. This acceleration has heightened concerns among policymakers and investors about the persistence of price pressures.
The European Central Bank responded to similar pressures by raising interest rates on Thursday, citing inflation driven by the Middle East conflict. In the U.S., traders are pricing in a roughly 73% chance that the Federal Reserve will raise interest rates next week, up from 61% the previous day.
Treasury yields also climbed amid inflation fears. The 10-year Treasury yield rose to 4.95% on Thursday, up from 4.83% late Wednesday. Before the war with Iran began, the yield stood at 3.97%. Current levels have not been seen since the autumn of 2023. Some investors are watching the 5% mark as a potential flashpoint, while Bank of America strategists suggest that yields above 7% could significantly impact expensive stocks.
Housing Market Faces Headwinds
Rising Treasury yields are directly increasing mortgage costs, creating headwinds for the housing industry. Average long-term U.S. mortgage rates hit their highest level in over 14 months. Consequently, sales of previously occupied U.S. homes fell in August to their slowest pace in more than a year.
The housing sector felt the pain on Wall Street. Lennar stock dropped 3.5%, while D.R. Horton stock fell 2.4%. These declines reflect investor anxiety about the affordability of housing in a high-interest-rate environment.
Consumer Spending and Labor Market
Despite the broader market downturn, some sectors showed resilience. Macy’s stock fell 4.7% even after reporting stronger-than-expected profit and revenue, suggesting that investor sentiment is currently dominated by macroeconomic fears rather than individual corporate performance.
The labor market remains a bright spot in the economy. Fewer workers applied for unemployment benefits last week, indicating a solid job market. This resilience in employment may help cushion the impact of higher interest rates on consumer spending, though the effect of rising gas prices on household budgets remains to be seen.
What’s Next
Investors will be closely watching the Federal Reserve’s decision next week regarding interest rates. With traders pricing in a 73% chance of a hike, any deviation from expectations could trigger further market volatility. Additionally, developments in the Middle East conflict will continue to influence oil prices and, by extension, inflation metrics and consumer costs.
The intersection of energy prices, inflation, and monetary policy presents a complex challenge for the U.S. economy. As President Trump noted, the situation may not improve until after the midterm elections, leaving consumers and businesses to navigate higher costs in the interim.
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