U.S. equities opened August with a broad-based relief rally Monday as crude oil tumbled and Treasury yields retreated from 18-month highs, after President Donald Trump called off a planned military strike on Iran over the weekend and said negotiations would resume.
West Texas Intermediate crude sank 5.9% to $79.69 a barrel, a three-week low, unwinding a chunk of the geopolitical premium built up over the past month. Brent slid 4.7% to $83.78.
The pullback in fuel prices rippled straight into rates. The 10-year Treasury yield fell 5 basis points to 4.69%, retreating from an 18-month high, while the 2-year eased 4 basis points to 4.27% and the 30-year dropped 5 basis points to 5.23%.
With the inflation impulse from energy fading, rate-hike bets cooled. Futures now imply roughly a 63% probability of a 25-basis-point Federal Reserve hike in September, down from about 80% before last week’s policy meeting, at which three officials dissented and Chair Kevin Warsh offered little forward guidance.
Data offered a second tailwind. The ISM Manufacturing PMI jumped to 55.6 in July from 53.3, the strongest factory expansion since May 2022 and well above the 54.0 consensus, with the employment index returning to expansion at 52.8.
The S&P 500 rose 1.3% to 7,584, while the Dow Jones Industrial Average advanced 520 points, or 1.0%, to 53,005.
The Nasdaq 100 climbed 1.3% to 28,645. The Russell 2000 outperformed, up 1.5% to 2,976.
The Energy Select Sector SPDR Fund (NYSE:XLE) was the worst performer, down 0.8% as crude tumbled.
Marriott International Inc. (NASDAQ:MAR) slid 7.4% on a mixed print.
Fair Isaac Corporation (NYSE:FICO) fell 7.2%, extending last week’s roughly 17% post-earnings collapse on reported insider selling.
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