US stock futures moved lower on Tuesday as investors returned from the Labor Day holiday. Rising oil prices, higher Treasury yields and stronger Federal Reserve rate hike expectations weighed on market sentiment.
Dow Jones Industrial Average futures fell about 0.8%, while S&P 500 futures declined around 0.3%. NASDAQ-100 futures traded close to unchanged levels. The moves came as Brent crude approached USD 100 per barrel amid continued tension between the US and Iran.
Investors also prepared for key US inflation reports later this week. The data could shape expectations for the Federal Reserve’s September policy meeting.
Dow futures dropped more than 400 points in early trading on Tuesday. S&P 500 futures also moved lower, while NASDAQ futures remained near the flatline.
Oil prices added pressure on stocks as supply concerns continued to grow. Brent crude rose above USD 98 per barrel during early trading. Meanwhile, West Texas Intermediate crude moved above USD 93 per barrel. Both benchmarks have climbed sharply over the past month.
The latest gains followed continued military action involving the US and Iran. Markets also tracked concerns about energy infrastructure and shipping routes in the Middle East. The Strait of Hormuz remains a key focus because a large share of global oil shipments moves through the region.
Higher energy prices can raise transportation and production costs. As a result, investors have become more focused on whether rising oil prices could keep US inflation elevated.
Expectations for another Federal Reserve rate increase strengthened after the latest US jobs report. The economy added 162,000 jobs in August, well above forecasts of about 55,000. The unemployment rate remained at 4.1%.
Money markets now assign about a 60% chance of a 25-basis-point rate increase at the Fed’s September meeting. The central bank is scheduled to announce its next policy decision after its September 15-16 meeting.
Bond yields have also moved higher as investors adjust their expectations. The benchmark 10-year Treasury yield recently reached its highest level since November 2023. The two-year yield also climbed to levels not seen since January 2025.
Ed Yardeni, president of Yardeni Research, said, “A run of central bank meetings over the coming weeks will test whether equity composure holds.”
He added, “Bond yields are also rising worldwide. The question is whether that reflects better-than-expected economic growth, higher-than-expected inflation, and/or looming fiscal debt crises.”
Investors will now watch the Producer Price Index on Thursday and the Consumer Price Index on Friday. Stronger-than-expected readings could increase expectations for another rate increase.
The cautious mood extended across international markets on Tuesday. Major Asia-Pacific stock indexes closed lower before US trading began.
Japan’s Nikkei 225 fell 1.7%, while the broader Topix dropped 1.83%. South Korea’s Kospi declined 0.58%, while the Kosdaq fell 1.25%. Australia’s S&P/ASX 200 lost 1%.
Mainland China’s CSI 300 slipped 0.36%, while Hong Kong’s Hang Seng Index fell 0.38%.
European markets also opened lower. The pan-European Stoxx 600 declined about 0.3% after the opening bell. Switzerland’s SMI recorded one of the largest regional declines.
Healthcare stocks faced additional pressure after Novartis reported another drug trial setback. Novartis shares fell about 10% after its del-desiran treatment for a muscle-wasting disorder failed in a late-stage study. Meanwhile, oil and gas shares gained as crude prices continued to rise.
Investors are also watching renewed trade tensions between the US and Canada. Canadian retaliatory tariffs covering about USD 20 billion of US goods took effect on Tuesday.
US President Donald Trump also criticized Canadian aircraft manufacturer Bombardier. He said the company should manufacture products in the US if it wants continued access to the American market.
Trump wrote on Truth Social, “NO MORE SELLING BOMBARDIER IN THE UNITED STATES!”
Global trade data added another factor for markets. Chinese exports rose 25% year over year in August, supported by demand for high-tech and AI-related products.
Meanwhile, German exports fell 0.8% in July from the previous month. Exports to European Union countries declined 1.6%, while shipments outside the EU increased 0.2%.
For Wall Street, however, oil prices and US inflation remain the main near-term focus. Traders will closely follow crude markets, Treasury yields and this week’s inflation reports before the Federal Reserve’s September meeting.
Also Read: FTSE 100 Live: Index Opened 16.06 Points Lower at 10,806.07 as Brent Climbs Near USD 100