Stock market today: Rate hopes push Asian shares higher while oil prices edge lower

On Monday, the S&P 500 gained 0.6% to 4,335.66, flipping from losses to gains after two Federal Reserve officials suggested interest rates might remain steady at their next policy meeting because a jump in longer-term bond yields may be helping to cool inflation without further market-rattling hikes by the Fed.

Oil prices, which had climbed Monday on worries about the violence in the Middle East, fell back.

The area embroiled in conflict is not home to major oil production, but fears that the fighting could impact the crude market sent a barrel of U.S. oil up $3.59 to $86.38. Brent crude, the international standard, rose $3.57 to $88.15 per barrel.

Early Tuesday, U.S. benchmark crude was down 34 cents at $86.04 per barrel in electronic trading on the New York Mercantile Exchange.

Brent crude, the international standard, lost 30 cents to $87.85 per barrel.

One potential outcome of the violence is a slowdown in Iranian oil exports, which have been growing this year, according to Barclays energy analyst Amarpreet Singh. Less supply of crude would raise its price, all else equal.

The conflict could also hurt the possibility of improving relations between Israel and Saudi Arabia, which is the world’s second-largest producer of oil.

Oil prices already were volatile. A barrel of U.S. crude had jumped from less than $70 during the summer to more than $90 last week, raising the pressure on inflation and the overall economy. It pulled back sharply last week before jumping again after the fighting began in Israel.

Monday’s rise in crude helped oil and gas stocks to some of Wall Street’s biggest gains. Marathon Oil rose 6.6%, and Halliburton climbed 6.8%.

Stocks of defense contractors that make weapons were also particularly strong. Northrop Grumman rallied 11.4%, and L3Harris Technologies gained 10%.

On the opposite end were companies that count fuel as among their biggest expenses. United Airlines sank 4.9%, and Carnival fell 4.3%.

But it’s interest rates, and expectations for where they will go, that have been driving Wall Street’s swings more than anything since the start of last year.

Wall Street hates higher interest rates because they knock down prices for stocks and other investments. They also make it more expensive for all kinds of companies and households to borrow money, which puts the brakes on the economy.

The 10-year yield fell to 4.64% after rising to 4.80%, up from 3.50% during the summer and from just 0.50% early in the pandemic. Trading in the U.S. Treasury market was closed Monday for a holiday.

Reports this week on inflation at both the consumer and wholesale levels are the next big data points due before the Fed makes its next announcement on interest rates on Nov. 1.

This upcoming week will also bring the unofficial start to earnings reporting season for the S&P 500, with Delta Air Lines, JPMorgan Chase and UnitedHealth Group among the big companies scheduled on the calendar.

In Israel, the country’s central bank said Monday it will sell up to $30 billion in foreign exchange to prop up the shekel, whose value tumbled after the violence began. It also said it will provide up to $15 billion to support market liquidity.

The shekel was down 2.3% against the U.S. dollar and back to where it was in 2016.

The dollar rose to 148.65 Japanese yen from 148.51 yen late Monday. The euro was unchanged at $1.0568.

Besides the U.S. dollar, another investment that usually does well in times of stress also rose. Gold was up $11.50 to $1,875.80 per ounce. On Monday, it added $19.10 to $1,864.30 per ounce.

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AP Business Writers Matt Ott and Elaine Kurtenbach and AP Writer Jon Gambrell contributed.