Crude Up, Stocks Down after Gulf Strikes Resume

Published as of: August 31, 2026, 9:16 a.m. ET

(Monday market open) August nears the finish line with major indexes down on surging oil after the U.S. struck two Iranian rocket launchers and Tehran attacked U.S. bases in Jordan. Despite this, Wall Street remains on track for monthly gains.

Back home, investors face an almost 60% chance of the first U.S. rate hike since 2023, according to the CME FedWatch Tool, after Federal Reserve Chairman Kevin Warsh said Friday that the Fed has "work to do" on inflation. "Warsh struck a hawkish tone at Jackson Hole—saying prices were 'not meaningfully slowing'—and renewed pricing for a September rate hike," said Liz Ann Sonders, chief investment strategist at the Schwab Center for Financial Research (SCFR).

Major indexes slipped Friday and Treasury yields climbed after Warsh's speech. Coming days feature a series of jobs reports that could help shape the Fed's decision. This Friday's August nonfarm payrolls report is crucial, with analysts expecting about 45,000 jobs created after a surprise decline in July. Another soft reading might give the Fed pause about a hike, but next week's inflation data also looms large. Earnings are scarce, though Wednesday's results from Broadcom (AVGO) could provide fresh AI clues.

1. Warsh rehashed: Warsh invoked the word "inflation" 25 times in his remarks, helping send the rate-sensitive 2-year note yield up 10 basis points Friday. Long-term yields also rose. The dollar climbed and gold fell. Rising yields raise borrowing costs, threatening economic and earnings growth. They also can steer investors away from stocks and toward fixed income. Small caps and sectors like real estate and utilities are particularly rate sensitive, and all struggled Friday. Tech also sagged, with recent heavy AI-related borrowing in focus. Recent cooler monthly inflation didn't appear to satisfy Warsh. "While this summer's PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved," he said. September's meeting is the Fed's last scheduled one until late October, just before mid-term elections, when tightening could be politically difficult. It's also a tough choice because economic growth has slowed recently. Still, Treasury yields can be influential. "If we have one takeaway over the past couple months, it's that the bond market is indeed final boss," said Kevin Gordon, head of macro research and strategy at SCFR.
    
2. Earnings concentration persists: Despite broader market breadth that makes the current rally look healthier than some in the recent past, concentration remains a concern, especially with earnings. Nvidia (NVDA) represents 18% of expected S&P earnings growth this year, with Micron (MU) representing another 14%. One-third of expected earnings growth this year comes from those two stocks, Sonders said. The top 10 earners—which include Chevron (CVX) and Exxon Mobil (XOM)—account for two-thirds of expected S&P earnings growth this year. Still, second quarter earnings growth was double digits for eight of 11 sectors and analysts expect double-digit gains for nine of 11 this quarter, FactSet said. Concentration can be worrisome if it gives misleading ideas about earnings growth and causes investors to make index investments based on that. For instance, if a handful of index stocks grow earnings 50% but the median is 15%, investors could get more bullish than appropriate. With 97% of S&P 500 companies reporting through Friday, blended second quarter earnings growth is 52% annually, FactSet said. Analysts expect 28% this quarter.
    
3. Buffet line starts for jobs data: Friday's nonfarm payrolls follows a surprise drop of 23,000 in July. The July figure comes back into the spotlight Friday as investors watch for possible revisions, and even June numbers aren't set in stone. The July report downwardly revised May and June jobs growth by more than 100,000, making the labor market look far weaker than going in. That was compounded Friday when the government's preliminary benchmark revision for payrolls from March 2025 through March 2026 came in at -79,000 when analysts had expected a gain of 183,000. Before Friday's payrolls report, investors get a parade of jobs data starting with tomorrow's July Job Openings and Labor Turnover Survey (JOLTS) and Wednesday's private sector August ADP jobs data. Job cuts data arrives Thursday. "The nonfarm payrolls reports have been weak recently, and if Friday's report is soft, this could ease rate hike concerns and translate into a bullish move for stocks," said Nathan Peterson, director of derivatives analysis at SCFR, in his Weekly Trader's Outlook.

• Energy stocks surged early on a fresh round of skirmishes in the Persian Gulf, the first in several weeks between Iran and the U.S. Haliburton (HAL), Chevron (CVX), and Exxon Mobil (XOM) all rose 2% or more. The stocks might also be finding support after President Trump said over the weekend that the U.S. and Venezuela have agreed for the U.S. to secure control of 65 billion barrels of oil reserves in Venezuela. CVX and XOM both have operations there.
   
• PG&E (PCG) plunged 16% early after California's state legislature introduced wildfire legislation without protection from liabilities for utilities, Barron's reported. Several Wall Street firms downgraded shares.
   
• Deere (DE) climbed more than 2% after getting upgraded to outperform from neutral by Baird. The firm says Deere is the "cleanest setup" in the sector given its high exposure to North America row crop equipment demand.
   
• Nvidia sagged 4% Friday, surrendering about half the prior day's earnings-based gains. The Information reported that the White House is developing an AI rule to limit China's remote access to chips. Nvidia just got back into China's market with its first sale of H200 chips, Bloomberg reported.
   
• Amazon (AMZN) climbed 4% Friday after Evercore ISI raised its price target and noted its survey shows Agentic AI is supportive for Amazon's retail business.
   
• Rubrik (RBRK) plunged 13% Friday despite better-than-expected second quarter revenue and improved guidance from the security software firm.
   
• The dollar index ($DXY) jumped 0.5% after Warsh's speech as investors began pricing in higher rate hike odds.
   
• Gold (/GC), sometimes seen as an inflation hedge, fell more than 3% Friday on ideas the Fed might get more aggressive fighting price increases.
   
• Despite renewed rate hike fears, the Cboe Volatility Index (VIX), sometimes called the "fear index," hit a new 2026 low Friday before rising slightly today. This could indicate market faith that Warsh can get inflation under control, though it's been above the Fed's 2% target for more than five years.
   
• Bitcoin fell nearly 3% after the Warsh speech Friday, dragging crypto-related stocks.
   
• Technically, last week's market action did some chart damage to the S&P 500 Equal Weight Index (SPXEW), which fell below its 20-day moving average for the first time in a month. Momentum measures are also lower.

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The small-cap Russell 2000^® Index (RUT—candlesticks) can be especially sensitive to rising rates, as small-cap stocks depend more on borrowing than their larger peers. On Friday, the RUT fell a sharp 1.39% and closed below its 50-day moving average (blue line) for the first time since late July. It did recover then from the technical blow to make a new high for the year by mid-August. Small caps are sometimes seen as a canary in the coal mine for the broader market, so any prolonged weakness might be worth noting.