S&P500 Forecast: Sellers Take Control as Oil Risk Returns, Yields Pop

August Ended Green but Monday Belonged to Sellers

U.S. stocks closed lower Monday as crude oil jumped on renewed fighting near the Strait of Hormuz and Treasury yields pushed to their highest levels since January 2025. Energy was the only S&P 500 sector with a bid. The rest of the market spent the final day of August repricing oil, rates and Warsh’s Jackson Hole message at the same time.

The Dow Jones Industrial Average fell 374.09 points, or 0.70%, to 53,185.90. The S&P 500 lost 25.62 points, or 0.33%, to 7,686.14. The Nasdaq Composite gave up 31.53 points, or 0.12%, to 26,370.89.

All three indices still posted gains for August. The Nasdaq led the way. The Dow closed its fifth straight monthly advance. Monday did not erase the month. It changed the tone heading into September.

Daily S&P 500 Index (SPX) Technical Analysis

The S&P 500 Index finished lower on Monday and on the weak side of the short-term pivot at 7727.86, which is likely controlling the near-term direction of the benchmark.

The main trend is up, but with the formation of the secondary lower top at 7771.48, momentum may be shifting to the downside. All it’s going to take is a break through the swing bottom at 7639.01 to change the main trend to down.

Potential downside targets include the 50-day moving average at 7566.58 and the intermediate retracement zone at 7565.31 to 7505.98.

Oil, Yields and Warsh All Pointed the Same Direction

Renewed U.S.-Iran airstrikes lifted crude and put the Strait of Hormuz back into the equity trade. Iran said it is still seeking a negotiated solution. The military picture Monday said otherwise. Oil shipments through the strait remain impaired. The longer that lasts, the harder it is for the rest of the market to look past the energy move.

Crude does not have to keep making new highs to cause a problem for stocks. It just has to stay elevated long enough to change the rate outlook. That is what the market was pricing Monday.

The 10-year Treasury yield rose more than 2 basis points to 4.75%. The 30-year gained more than 3 basis points to 5.243%. The 2-year slipped to 4.339%. The long end did the damage again. Warsh was still in the price from Friday. He said the summer inflation numbers did not show meaningful improvement. Traders are now pricing more than a 65% chance of a September rate increase.

Energy rose 2.1% on the session. Technology managed a 0.3% gain but the strength was narrow. Communication services fell 1.63%. Industrials lost 1.16%. Consumer discretionary dropped 0.72%. Materials fell 0.84%. Real estate lost 0.77%. Financials gave up 0.71%. The market had two places to go Monday: energy and selected chip names. Everything else was marked down.

Volume came in at 15.65 billion shares, slightly above the 20-day average. Declining issues outnumbered advancers 1.95-to-1 on the NYSE. On the Nasdaq, 2,931 stocks fell while 1,859 rose. The S&P 500 posted 5 new 52-week highs against 11 new lows. The Nasdaq recorded 40 new highs and 146 new lows. Sellers showed up on normal volume on the last day of the month.

Stocks in the News

Halliburton and Valero each gained 1.9% on the oil move. PG&E dropped 20.1% after California lawmakers approved an amendment that did nothing to reduce wildfire-liability exposure for grid operators. That was the stock’s largest percentage loss in more than six years.

Utilities fell 1.18% on the session. The 30-year yield above 5% was already pressuring the group before PG&E hit. Income buyers do not need to take company-specific wildfire risk to find yield when Treasuries are paying above 5%. PG&E turned that sector pressure into a full-scale selloff.

GameStop gained 2.9% after saying it would pay about 27% of a previously announced $1.4 billion debt exchange with cash instead of new stock.

What to Watch

Crude and the long end of the Treasury curve are running the tape into September. The Strait of Hormuz is still disrupted. Oil does not need to make new highs from here. It just has to stay firm long enough to keep Warsh’s Jackson Hole message in the price.

The September hike probability is above 65% and climbing oil is not going to walk it back. Energy remains the hedge inside the equity market. The rest of the indices need yields to settle before buyers are likely to come back with conviction.

The S&P 500 closed on the weak side of the pivot at 7,727.86 with a secondary lower top forming at 7,771.48. A break through 7,639.01 changes the main trend to down and opens the 50-day moving average at 7,566.58. The August rally held on the monthly chart. The daily chart is starting to lean the other way.

More Information in our Economic Calendar.