U.S. stock futures declined early Monday, extending last week's late selloff as elevated oil prices and rising bond yields weighed on investor sentiment. Dow Jones Industrial Average futures dropped roughly 300 points, or 0.6%, while S&P 500 futures lost about 21 points, or 0.28%. Nasdaq 100 futures edged down 32.5 points, or 0.11%.
Oil prices remained elevated above $100 per barrel following drone attacks in the Gulf region, with Brent crude touching $112, its highest since May 5. U.S. crude also advanced, climbing to $106.21. The energy rally has been fueled by fading hopes for a peace deal near the strategic Strait of Hormuz, where an estimated one billion barrels of oil remain trapped, according to PVM analyst Tamas Varga. He cited belligerent rhetoric and attacks on regional producers and ships as key drivers.
The surge in oil is feeding through to bond markets, as traders bet that higher energy costs will make inflation harder to tame. The U.S. 10-year Treasury yield hit a 15-month high at 4.631%, while the 30-year bond yield topped 5.159%. The rise in yields has renewed pressure on equities, particularly growth stocks that are sensitive to higher discount rates.
The S&P 500 had posted seven consecutive weekly gains, driven largely by artificial intelligence and big tech stocks. However, on Friday the Dow fell 1.07%, the S&P 500 dropped 1.24%, and the Nasdaq Composite lost 1.54%. Kenny Polcari, chief market strategist at Slatestone Wealth, noted that the market had gotten ahead of itself, caught up in momentum from the AI trade while ignoring signals from the bond market and economic data.
Nvidia Earnings in the Spotlight
Nvidia is set to report quarterly results on Wednesday, a key event for the AI sector. The stock has climbed 36% since a low in March, while the Philadelphia SE Semiconductor Index has surged over 60%. The report will be critical not only for Nvidia but also for rivals like AMD and Intel, both of which fell sharply on Friday amid a broader chip selloff.
Allen Bond, a portfolio manager at Jensen Investment Management, said Nvidia needs to show results that match the run-up in its share price. Yung-Yu Ma of PNC added that the focus is now on whether Nvidia can maintain its lead as competition intensifies.
Retail Earnings to Test Consumer Strength
Retailers take center stage in the second half of the week, with Walmart reporting on Thursday. Home Depot, Target, and TJX Cos. are also among those releasing results. Investors are watching closely to see whether higher prices for gas and food are starting to crimp consumer spending, which accounts for more than two-thirds of U.S. economic activity.
Ma warned that rising costs will eventually catch up with consumers and moderate spending. The retail earnings will be a key test of consumer resilience.
The selloff could ease if oil news improves or if Nvidia provides strong evidence that AI spending remains robust. Conversely, a further jump in crude could push yields higher, strengthen bets on tighter Federal Reserve policy, and turn the current valuation drop into a broader pullback. George Lagarias, chief economist at Forvis Mazars, said a proper correction would surprise him unless bond market swings trigger a credit event.
