U.S. stock market pulled back from near-record highs on Monday, with all three major indexes falling roughly 1%. Several risk factors weighed on the market, including rising interest rates, climbing oil prices, the escalating threat of Hurricane Milton, and negative developments involving a few mega-cap tech stocks.

The 10-year US Treasury yield surged back above 4%, its highest in nearly two months, driven by Friday's stronger-than-expected September jobs report. The report revealed a robust addition of 254,000 jobs, well above the 150,000 forecast, while the unemployment rate edged down to 4.1%.
 

US stock market today

U.S. stocks ended sharply lower on Monday after the Dow Jones Industrial Average finished last week at a record high, as Treasury yields climbed above 4% for the first time since August.

The Dow Jones Industrial Average went down 398.51 points, or 0.9%, to end at 41954.24. It is the index's largest one day point and percentage decline since September 6.

The S&P 500 declined 55.13 points, or 1%, to finish at 5695.94. It is the index's largest one day point and percentage decline since September 6.

The Nasdaq Composite fell 213.95 points, or 1.2%, to close at 17923.90.
 

Oil prices continued to surge ahead of economic data

Oil prices continued to surge on Monday, rising by about 4% as tensions in the Middle East continued to simmer on the first anniversary of the Hamas-led attack against Israel.

The rise in oil prices and the stronger jobs report are fanning fears of a potential rebound in inflation, which would mean fewer rate cuts from the Federal Reserve.
 

"After Friday's strong employment report, the consensus might pivot to 'no rush to ease further' during the fall. We can't rule out 'higher for longer' making a comeback this winter. We are in the none-and-done camp for the rest of this year," Yardeni Research said in a note on Monday.
 

Finally, a Wells Fargo analyst downgrade of Amazon sent that stock lower by about 3%, while Alphabet shares dropped 2% after a judge ordered the company to open its app store to more competition, handing a victory to Epic Games.

 

Recent Inflation Data

According to the Atlanta Fed's Inflation Dashboard, all inflation metrics have decreased over the past year. As of August 2024, headline annual CPI inflation stands at 2.5%, while core CPI, which excludes volatile food and energy prices, is at 3.2%.

Although these figures are still above the Federal Reserve's 2% inflation target, inflation is significantly lower than the levels seen during much of 2021 to 2023. This progress prompted the FOMC to implement the first interest rate cut of the current cycle in September, signaling that the need for highly restrictive monetary policy has eased.
 

The September CPI report

The September CPI report is also due out this Thursday. Economists expect the CPI index to rise 2.3% year-over-year in September, down from 2.5% in August. Bank of America analysts note that an upside surprise in last month's inflation reading has the potential to send stocks on a roller coaster this week.

Morgan Stanley expects core CPI prices to rise by 0.26% in September, compared to a consensus of 0.2%. The year-over-year core CPI is projected to remain at 3.2%. Goods inflation is expected to show positive movement, driven by used cars, while airfares inflation also remains positive. The report's implications for headline and core inflation will guide expectations for the Fed's monetary policy stance.