By Zoey
U.S. stocks traded mixed on Monday as investors returned from a three-day holiday weekend, balancing easing geopolitical tensions in the Middle East against growing concerns that higher inflation could force the Federal Reserve to raise interest rates later this year.
The broader market struggled to build on recent gains after posting one of its strongest stretches in months. The S&P 500 slipped 0.3%, remaining about 1.7% below the record high it reached earlier this month after securing its 11th weekly advance in the past 12 weeks.
The technology-heavy Nasdaq Composite declined 1.2%, pressured by weakness in high-growth technology and artificial intelligence stocks, while the Dow Jones Industrial Average outperformed the broader market, climbing 164 points, or 0.3%, during afternoon trading.
Investor sentiment received some support from developments in the Middle East after U.S. and Iranian officials held discussions over the weekend aimed at ending the conflict between the two countries. U.S. Vice President JD Vance described the talks as providing a “good foundation for a successful final deal,” raising hopes that diplomatic progress could reduce tensions in one of the world’s most strategically important energy regions.
A lasting agreement could reopen the Strait of Hormuz to uninterrupted shipping, restoring confidence in global oil supplies moving through the Persian Gulf. Although Iran’s military announced over the weekend that it had once again closed the vital waterway, U.S. Central Command disputed that claim, adding uncertainty to the situation.
Oil prices nevertheless declined sharply as traders grew more optimistic that supply disruptions may ease. Brent crude, the international benchmark, fell 3.6% to $77.70 per barrel, moving closer to the roughly $70 level seen before the conflict intensified. U.S. benchmark West Texas Intermediate crude dropped 2.7% to $74.55 per barrel.
While falling energy prices typically ease inflation concerns, the bond market continued to signal investor caution. Treasury yields climbed as traders increasingly anticipated that the Federal Reserve may need to tighten monetary policy further if inflation remains elevated.
The yield on the benchmark 10-year U.S. Treasury note rose to 4.51%, up from 4.46% before the holiday weekend and significantly higher than the 3.97% level recorded before the outbreak of the Iran conflict. Rising bond yields generally translate into higher borrowing costs across the economy, affecting mortgages, business loans, and consumer credit while also placing pressure on stock valuations.
Market participants are now preparing for Thursday’s inflation report, with economists expecting consumer inflation to accelerate to 4.1% in May from 3.8% in April. Persistent inflation has fueled speculation that policymakers may have little choice but to resume interest rate increases despite earlier hopes that rates had peaked.
According to CME Group’s FedWatch data, traders are pricing in roughly a 90% probability that the Federal Reserve will raise its benchmark interest rate at least once before the end of the year. A smaller group of investors even expects multiple rate increases if inflation continues to accelerate. Just one week earlier, markets had assigned only a 57% probability of at least one additional rate hike.
The prospect of higher interest rates weighed heavily on expensive growth stocks, particularly companies tied to the artificial intelligence boom that have led much of Wall Street’s rally over the past year.
Among the day’s biggest decliners was SpaceX, whose publicly traded shares fell 10.7% to around $165. The stock headed for its third consecutive daily loss after initially surging following its highly anticipated U.S. stock market debut, where shares were offered at $135 each.
Healthcare stocks, however, provided some support to the broader market. AbbVie gained 7.1% after announcing an agreement to acquire Apogee Therapeutics in a deal valued at approximately $10.9 billion. The acquisition strengthens AbbVie’s pipeline of experimental treatments targeting dermatological, respiratory, inflammatory, and immune-related diseases.
Shares of Apogee Therapeutics soared 46.7% after investors welcomed the takeover announcement and the substantial premium offered in the acquisition.
International markets generally delivered stronger performances than Wall Street. In Europe, Britain’s FTSE 100 advanced 0.7% after Prime Minister Keir Starmer announced he would step down as leader of the governing Labour Party and leave office within weeks, a political development closely watched by investors.
Asian markets also extended their recent rally. Japan’s Nikkei 225 climbed 1.5% to close at another record high, driven by continued enthusiasm for artificial intelligence-related companies. South Korea’s Kospi also reached a fresh all-time high, rising 0.7% as technology and semiconductor stocks continued to attract strong investor demand.
Despite Monday’s mixed performance, investors remain focused on upcoming economic data, central bank policy expectations, geopolitical developments, and corporate earnings, all of which are expected to shape market direction in the weeks ahead.
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