Dow tumbles 370 points after U.S. strikes Iran, but index posts fifth straight winning month

The three major averages finished lower on Monday, the last trading day of August.

The S&P 500 fell 0.33% to finish at 7,686.14, while the Nasdaq Composite declined 0.12% to settle at 26,370.89. The Dow Jones Industrial Average lost 374.09 points, or 0.7%, to 53,185.90.

— Sean Conlon

The stock market still has room to broaden beyond AI-related names into more cyclical areas, but warned that the outlook depended heavily on a continued soft landing, according to Scott Chronert, head of U.S. equity strategy at Citi Research.

“All in all, the balance which Mr. Warsh seems to be bringing to the Fed process appears reasonable, and we look forward to more from the Fed’s task forces,” Chronert wrote in his Friday note.

However, he said Citi’s broadening call remains dependent on “some combination of lower oil prices, resultant lesser inflation pressure, and, ultimately, room for the Fed to react more dovishly to mixed labor trends.”

Chronert said Citi would like to see WTI crude fall back below $80 a barrel along with the 10-year Treasury yield move lower as the Fed provides some relief on rates.

“Confidence in soft-landing economic conditions remains critical to the broadening playbook, in our view, and this still appears to be the appropriate backdrop,” he said.

— Deena Zaidi

A 6% annual appreciation in the Chinese yuan relative to the dollar is pulling down estimates for iPhone price hikes and their effect on the company’s gross margins, according to investment bank Jefferies.

The potential hikes on the higher storage units of the Apple mobile phone could be 5 to 8 percentage points lower than previous estimates, analysts said in a Monday note to clients.

Those units account for “only 2% – 3% of the vol but the original prices likely yield higher [gross margins],” Edison Lee at Jefferies wrote to clients.

— Tobias Burns

Check out some of the companies making the biggest moves midday:

• PG&E,Edison International— The old Pacific Gas & Electric tumbled 19% and Edison slumped 24% after California lawmakers blocked a proposal that would have limited the amount of money individuals could seek from utility companies whose equipment ignited wildfires. After the vote, several Wall Street analysts downgraded the stocks, with Mizuho analysts writing that investors are better-positioned in utilities that have few wildfire liability issues.
• Apple– The consumer tech giant slid nearly 2% afterBloombergreported, citing people familiar, that the leader of Apple’s App Store and product events would be stepping down. The executive, Phil Schiller, will remain at the company and work on unnamed initiatives, Bloomberg reported. The change in roles comes a day before John Ternus takes the helm at Apple, succeeding Tim Cook.
• Science Applications International– Shares rose 4% after the defense contractor increased its forecast for the year on the back of strong sales in the latest quarter. SAIC expects to earn between $10.65 and $10.75 per share after adjustments this year. Previously, it anticipated adjusted earnings of $9.90 to $10.10 per share. Revenue is expected to range from $7.2 billion to $7.3 billion, above a prior forecast of $7.0 billion to $7.2 billion.

Read here for the full list.

— Scott Schnipper

Apple’s lead for its App Store and events has stepped down from his role, Bloomberg reported on Monday.

Citing people familiar with the matter, Bloomberg added that Schiller will remain at the company and will work on unnamed initiatives.

Schiller’s role change comes just before John Ternus is set to take over from Tim Cook as CEO of the consumer technology giant on Tuesday. Shares hit their lows of the session and were off about 2% after the report.

Apple 1-day.

TSLA, 1-day

Ulta Beauty was another winner on Monday, with shares rising roughly 4%.

— Sean Conlon

California-based utility providers headed for their worst day in several years on Monday.

Edison International cratered more than 22%, which would mark its largest one-day decline since 2001. PG&E shares plunged around 19% in midday trading, on track for their worst day since 2020.

Monday’s decline came after California lawmakers reportedly stopped Gov. Gavin Newsom’s plan to insulate utility providers from lawsuits by insurers over wildfires.

Edison International and PG&E, 1-day

Energy is the only S&P 500 sector in positive territory on Monday morning.

The group was up about 2%, putting its gain this month at more than 6%.

S&P 500 Energy, month-to-date

Among the remaining 10 sectors, communication services and utilities were the two biggest laggards, falling 1.9% and 1.6%, respectively. The two are pacing for a monthly loss of 1.5% and 5.6%.

— Sean Conlon

Federal Reserve ChairKevin Warshexpressed confidence in the U.S. economy during brief remarks Monday morning at the G20 conference.

“As I show up today, 100 days into my tenure, a comment that I made in Jackson Hole a day or two ago is that secular stagnation seems like a description of a past long ago. The new period is one of secular growth,” Warsh said, referring to his Friday presentation at the Fed’s annual symposium in Wyoming.

The central bank leader added that the current climate is “one of a global investment surge,” echoing a theme he has sounded repeatedly over the past several months of artificial intelligence spurring cash flows towards business growth.

— Jeff Cox

The three major averages began Monday’s session in the red.

The S&P 500 fell 0.2% just after the opening bell, along with the Nasdaq Composite. The Dow Jones Industrial Average shed 207 points, or 0.4%.

— Sean Conlon

In markets as in movies, suspense builds through the slow, quiet scenes of the second act.

The stock market is doing just enough, through slim trading volumes and narrow index trading ranges, to escape August with its uptrend intact.

The S&P 500 is within half a percent of where it closed three weeks ago. It has slouched and equivocated in the two weeks since it hit the last record high just above 7800.

But the index has stayed within 2% of the peak, the pullbacks so far halting a handful of points above what had been the top of the former multi-month range. Read more.

— Michael Santoli

Check out the companies making the biggest moves premarket:

• Energy stocks — U.S. oil prices rose more than 3% after the U.S. and Iran exchanged strikes in the Middle East for the first time since July. Energy companies were higher in premarket trading Monday, with Halliburton up more than 2.5% and Chevron up 2%. Valero Energy and Occidental Petroleum were also up 2%, while Exxon Mobil rose more than 1.5%.
• PG&E — The utility company sunk 16% after California lawmakers blocked a proposal that would have limited the amount of money individuals could seek from utility companies whose equipment ignited wildfires. After the legislative result, several Wall Street analysts downgraded the stock, with Mizuho analysts writing that investors are better-positioned in utility companies that have few issues with wildfire liability.
• Pinterest — Shares were off more than 3% after the company on Friday revealed that CFO Julia Brau Donnelly will leave at the end of October. The company’s vice president for finance and business operations, Vikram Naidu, will replace Donnelly on an interim basis.

Read the full list here.

— Davis Giangiulio

Aon agreed to pay private equity giant KKR $17 billion for USI Insurance Service, the companies confirmed Monday.

The deal is “expected to deliver $395 million in annual run-rate net adjusted EBITDA impact from revenue and cost synergies,” they said in a release.

“Combining with USI will establish the premier U.S. middle-market platform, deepen our context advantage and position Aon to accelerate organic growth. Building on the success of our acquisition of NFP, USI will substantially enhance our middle-market footprint,” Aon CEO Greg Case said in a statement.

Aon and KKR shares were flat in the premarket.

— Fred Imbert

Short-term government borrowing costs in various markets reached multi-year highs on Monday, as fresh U.S.-Iran combat fueled inflation fears.

The resumption of hostilities added to fears around inflation and interest rate hikes that were stoked by an unexpectedly hawkish speech from Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium on Friday.

The yield on Japan’s 2-year government bond touched a 31-year high on Monday, while Germany’s 2-year bund yield was trading at its highest level since July 2024. France’s 2-year government bond yield rose to its highest since April 2024.

Bond prices move inversely to yields.

Bonds at the short end of the curve saw a broad sell-off across Europe, with short-term government borrowing costs also rising in the U.K., Spain, Portugal, Poland and Switzerland.

Asia-Pacific market closed mixed Monday.

Japan’s benchmarkNikkei 225 fell 0.14% to 66,311.93, while the Topix rose 0.23% to 4,156.29. South Korea’s Kospi reversed losses to close 0.46% higher at 6,820.02 and the small-cap Kosdaq ended the trading day 0.49% lower at 834.29.

Mainland China’s CSI 300 gained 0.35% to 4,625.09 while Hong Kong’s Hang Seng closed flat at 25,566.99.

Australia’s S&P/ASX 200 fell 0.18% to 9,076.

— Lee Ying Shan

European equities were little changed at the open on Monday, with the regional Stoxx 600 index moving marginally lower and no broad consensus movement among sectors.

Energy stocks saw gains as oil prices jumped, with investors monitoring a reignition of hostilities between the U.S. and Iran.

The Stoxx 600 is currently on course to end the month 0.9% higher.

U.K. markets are closed Monday for a national holiday.

— Chloe Taylor

The 10-year U.S. Treasury yield slipped less than 1 basis point to 4.716% on Monday, holding near elevated levels after Federal Reserve Chair Kevin Warsh’s hawkish Jackson Hole speech drove yields higher Friday.

Warsh at Jackson Holegave a more hawkish readingof the economy than he had in July. He said elevated prices needed to be the Fed’s main focus and described financial conditions as not being broadly restrictive, a change from his July news conference, when he said they were uneven.

He did that while swiping back at his criticsand insisting his policy of deliberate ambiguity about Fed policy is here to stay.

— Lee Ying Shan

The yen weakened to 160 against the dollar on Monday, as it gives up most gains following U.S.-Japan intervention to prop up the currency.

UBP said in a note Monday that the intervention had raised the cost of speculative yen selling, but warned its impact was unlikely to endure without a shift in economic fundamentals.

The yen’s main vulnerability remains the roughly 275-basis-point gap between U.S. and Japanese policy rates, the bank’s Asia senior economist Carlos Casanova wrote. With the Bank of Japan constrained by cooling inflation and fragile demand, carry trades remain attractive unless the BOJ tightens further or the Federal Reserve cuts rates.

Casanova added that the Bank of Japan remained hawkish but was constrained when it came to normalizing policy rapidly.

“Our adjusted Taylor-rule estimate implies that rates should be around 1.35%,” the bank said, pointing to one more 25-basis-point hike by October and possibly another in 2027.

— Lee Ying Shan

Shares of South Korean beauty company APR have surged nearly 100% this year as the K-beauty company rapidly expands its presence in the U.S.

Its flagship Medicube brand is set to enter Costco stores across the U.S. in September, APR told CNBC. Medicube’s Zero Pore Pad 2.0, a skincare product designed to cleanse pores, will be available across the retailer’s U.S. stores.

The upcoming launch marks APR’s latest push into major U.S. retailers, following launches at Ulta Beauty in August last year, Target in April and Walmart in June.

The Korean beauty company, which listed on South Korea’s benchmark Kospi in 2024, now has a market capitalization of about 17.3 trillion won ($12.5 billion), nearly twice that of longtime beauty heavyweight Amorepacific and more than three times that of LG Household & Health Care.

Read the full story here.

— Jenny Lee

China’s manufacturing activity in August shrank for a second straight month, though by less than market estimates, keeping the pressure on Beijing to support the economy as growth loses momentum.

The official purchasing managers’ index reading came in at 49.8, compared with49.2 in July,National Bureau of Statistics data showed Monday, better than Reuters-polled economists’ forecast of 49.6.

China’s economy has come under mounting strain, withgrowth slowing to 4.3% in the second quarter, the weakest pace since late 2022, as soft domestic demand and a prolonged property slump continue to weigh on activity.

Read the full story here.

— Anniek Bao

Oil rose Monday, amid heightened concerns over supply disruptions after U.S. forcesstrucktwo Iranian rocket launchers on Larak Island on Sunday.

Futures for international benchmarkBrent crudefor November delivery gained 1.54% to $89.46 a barrel. U.S.West Texas Intermediatefuturesfor October advanced 1.44% at $84.60 per barrel.

Vessel traffic through the Strait of Hormuz, a key route for global energy shipments, has been severely disrupted by the Middle East conflict, set to extend to its seventh month.

— Justina Lee

Asia-Pacific markets fell on Monday, with South Korean equities leading declines in the region after U.S. forces struck two Iranian rocket launchers on Larak Island on Sunday.

The benchmark Kospi was down 3.5%, while the small-cap Kosdaq declined 3.8%.

Japan’sNikkei 225 was down 2.16%, and the Topix was 0.95% lower. Australia’s S&P/ASX 200 lost 0.27%.

— Lee Ying Shan

Asia-Pacific markets were set to fall Monday after the U.S. struck Iranian rocket launchers at Larak Island in the Strait of Hormuz, reigniting fears of an escalation.

Japan’sNikkei 225was poised to drop, with the Chicago and Osaka futures contract at 65,530 and 65,830, respectively, compared with the index’s previous close of 66,405.56.

Hong Kong’sHang Seng indexfutures were at 25,472, compared with the index’s last close of 25,584.49.

Futures for Australia’s S&P/ASX 200 last traded at 9,009, the index closed at 9,092.3.

U.S. forces struck two Iranian rocket launchers on Larak Island on Sunday. Islamic Revolutionary Guard Corps were preparing rockets carrying sea mines for launch into the Strait of Hormuz, U.S. Central Command confirmed to MS NOW.

“Last week, CENTCOM completed clearing sea mines from the strait’s international shipping routes. U.S. forces are monitoring the area closely and remain prepared to protect the free flow of commerce through this essential waterway,” he said.

— Lee Ying Shan

Yields are near multiyear highs, and stock volatility has picked up. But Jefferies chief market strategist David Zervos isn’t worries.

“I believe the Treasury has become the dominant policy actor in shaping financial conditions, leading me to remain constructive on bonds and equities as buybacks and potential curve-twisting operations provide a powerful market backstop,” he wrote. “Treasury intervention can help offset bond market disruptions, support a weaker dollar, and drive lower long-end yields, creating a favorable backdrop for risk assets.”

— Fred Imbert