The main stock indexes were lower on Monday as oil prices and interest rates surged amid what looks more and more like a stalemate at the Strait of Hormuz. Investors, traders and speculators cast wary eyes on the Middle East ahead of the release of consumer and producer inflation data on Wednesday and Thursday.
A cooler-than-expected July jobs report lifted odds the Federal Open Market Committee (FOMC) will stay on pause when it meets again in September. Price action shifted back in favor of a rate hike today, though, as it appeared any durable peace in the Middle East will leave Iran in control of traffic through the critical channel connecting Persian Gulf oil and gas production to global markets.
“The S&P 500’s breakout from a nearly two-month trading range could get a test this week from inflation and geopolitics,” E*TRADE from Morgan Stanley Managing Director Chris Larkin writes. “The jobs report may have eased some anxieties about a Fed rate hike next month, but those concerns could hit new highs without cooler-than-expected inflation numbers this week.”
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As Larkin notes, last week’s rally was based on enthusiasm about a deal to reopen the Strait of Hormuz. “Without a deal on the table,” he cautions, “markets may be less likely to respond positively to vague reports about progress in negotiations.”
The main event on this week’s economic calendar is the release of the July Consumer Price Index (CPI) report on Wednesday. Producer Price Index (PPI) data will follow on Thursday.
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The front-month West Texas Intermediate crude oil futures contract was up 4.9% on Monday to $82.05 per barrel. The 2-year Treasury yield rose to 4.241% vs 4.204% on Friday. The 10-year was up to 4.705% from 4.658%, the 30-year to 5.249% from 5.210%.
At the closing bell, the tech-heavy Nasdaq Composite had shed 0.3% to 26,605, the broad-based S&P 500 was lower by 0.06% to 7,753, and the blue-chip Dow Jones Industrial Average had declined 0.1% to 53,975.
Jefferies says AAPL is a sell
Apple (AAPL, -1.5%) was one of the worst-performing Dow Jones stocks on Monday after a team of Jefferies analysts led by Edison Lee downgraded the iPhone maker from Hold to Underperform, the equivalent of a Sell rating.
“Our supply chain checks suggest that the all-glass iPhone has been canceled due to low yield,” they write. “We view this as a major setback to efforts to bring in higher-priced iPhones amid soaring memory costs.”
The analysts had forecast a September 2027 release of the all-glass iPhone. Higher costs and a lower average selling price (ASP) is a dynamic that’s going to pressure Apple’s margins and its earnings per share.
“More importantly,” Lee & Co. write, “we believe the plan was to extend the all-glass features to future iPhone Pro and Pro Max models, further raising their ASP and margin.”
Canceling all-glass iPhone models lowers the analysts’ estimated compound annual growth rate for the iPhone ASP between fiscal 2026 and fiscal 2031 from 9.0% to 6.8%.
Berkshire gets an earnings bounce
Berkshire Hathaway (BRK.B, +1.5%) rallied to a new 52-week high and to within a modest “up” day of a new all-time high after management reported an expectations-beating operating profit (PDF) for the second quarter.
CEO Greg Abel is deploying the cash pile that seemed to define the last several quarters of Warren Buffett’s run as the top stock-picker for the Berkshire Hathaway portfolio. Abel also increased the pace of stock buybacks during the quarter.
BRK.B established its all-time closing high of $539.30 on May 2, 2025, the day before Buffett announced his retirement as CEO at Berkshire’s annual meeting. Buffett did say in mid-July that he led the effort to add Google parent Alphabet (GOOGL, +0.9%) to the Berkshire portfolio.
UBS Managing Director Brian Meredith reiterated his Buy rating and raised his 12-month target price from $585 to $604, citing Berkshire’s “strong balance sheet, upside to earnings from operational improvements, and deployment of excess cash into accretive acquisitions and/or share repurchases.”
