Financial Markets                      09/09 15:30

   

   Stocks on Wall Street lost ground again Wednesday as the price of crude oil 
climbed back above $100 a barrel amid further escalation in the U.S. war with 
Iran.

   The S&P 500 index fell 0.5%. The Dow Jones Industrial Average dropped 0.8%, 
and the Nasdaq composite gave up 0.6%. The indexes are each on track for a 
weekly loss.

   The losses were broad, with retailers among the companies that pulled the 
market lower. Amazon fell 1.8%, Starbucks lost 1.9% and Home Depot dropped 1%. 
Every sector within the benchmark S&P 500 declined except for energy, which 
rose as oil companies notched gains. Exxon Mobil rose 2.2% and Chevron added 
1.9%.

   Oil prices drove much of the action on Wall Street. The U.S. destroyed five 
Iranian tankers on Tuesday in a series of attacks between the two nations. The 
conflict that began in February has essentially shut down traffic in the Strait 
of Hormuz, where a fifth of the world's oil supply passed before the war began.

   The price of Brent crude, the international standard, rose 3.4% to settle at 
$101.21 a barrel. It marks the first time the price surpassed $100 a barrel 
since July.

   The Iran war is likely going to keep oil prices elevated at least through 
the U.S. midterm elections in November, President Donald Trump said Wednesday.

   The jump in oil prices over the course of the war has fueled already high 
inflation. Gasoline prices in the U.S. are up about 32% from a year ago to 
$4.22 per gallon. Higher fuel prices cut into household budgets directly when 
it comes to the cost of driving, but they also indirectly raise prices for 
goods because of higher shipping costs.

   The price of diesel, which can have an outsized impact on consumers because 
it is used in shipping and production, hit an all-time high Friday and has 
continued to climb since. The average price for a gallon reached $5.94 
overnight and is now 9 cents higher than it was Friday.

   Inflation was already stubbornly high when the U.S. started its war against 
Iran because of the ongoing U.S. trade war with much of the world. That trade 
war is also heating up, especially between the U.S. and its close ally and 
trade partner Canada.

   Wall Street will get more updates this week on inflation, starting with a 
look at prices at the wholesale level on Thursday with the release of the 
Producer Price Index for August. It measures prices businesses pay for goods 
before they reach customers. That report will be followed up Friday with the 
release of the Consumer Price Index, or CPI, for August, which shows the more 
direct price impact for households.

   The latest reports are expected to show that the rate of inflation remains 
above 3%. That has been an issue for the Federal Reserve, which is aiming to 
hold inflation at a target rate of 2%. The central bank has been holding rates 
steady, but Wall Street is leaning toward a 62% chance that it will raise its 
benchmark interest rate at its meeting next week, according to data from CME 
Group.

   Higher interest rates make borrowing more expensive. The goal of raising 
interest rates is to slow the economy and cool inflation.

   Rising Treasury yields in the bond market were also weighing down stocks on 
Wall Street Wednesday.

   The U.S. Treasury Department on Wednesday said it would buy back up to $6 
billion in long-term debt. That follows an announcement in August previewing 
plans for an unusually large buyback in an effort to contain rising yields, 
which make it more expensive for U.S. companies to borrow money and also weigh 
down other investments, such as stocks.

   Bond yields had been holding steady prior to the announcement, but gained 
ground shortly after.

   "The simplest version here is that market interventions have a long history 
of not working very well," said Guy LeBas, chief fixed income strategist at 
Janney Montgomery Scott.

   The yield on the 10-year Treasury, which tends to impact mortgage rates, 
rose to 4.85% -- its highest point since late October of 2023 -- before easing 
to 4.84% from 4.80% late Tuesday. The yield on the 2-year Treasury, which tends 
to track expectations for Fed moves on interest rates, rose to 4.43% from 4.39% 
late Tuesday.

   Bond yields have an inverse relationship to prices. Yields rise as bond 
prices fall. Rising yields signal that investors are demanding a higher return 
from Treasurys.

   Elsewhere on Wall Street, shares of Meta Platforms rose 6.6% as the parent 
company of Instagram and Facebook launched a personal artificial intelligence 
agent, Muse, for people 18 and over who are looking for help with day-to-day 
tasks like schedules and shopping.

   All told, the S&P 500 fell 37.16 points to 7,636.36. The Dow dropped 405.41 
points to 52,380.66, and the Nasdaq gave up 168.07 to close at 26,253.34.

   Markets in Europe fell while markets in Asia closed mixed.

   ___

   AP Business Writers Yuri Kageyama and Michelle Chapman contributed to this 
report.

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