The S&P 500 ended Monday almost unchanged as investors weighed renewed uncertainty around U.S.-Iran negotiations against hopes that the Strait of Hormuz could eventually reopen. With key inflation data due this week, Polymarket traders are leaning toward another positive open Tuesday.
The S&P 500 slipped 0.06% to close at 7,753.11, after opening at 7,751.74. The Aug. 11 Polymarket contract implied a 59% probability that the index will open higher, although the market has been volatile as traders reassess the outlook for inflation, interest rates and the Middle East.
Why That Number Matters
The S&P 500 remains close to its record closing high of 7,757.64, reached Friday after a weak July jobs report increased expectations that the Federal Reserve could keep interest rates steady for longer.
But Monday’s session showed how quickly that optimism can be tested. Oil prices jumped more than 5% as doubts grew over whether the U.S. and Iran can reach a broader agreement, putting renewed pressure on inflation expectations just as investors prepare for July’s CPI report on Wednesday and PPI data on Thursday.
The Case for Markets
The market continues to have several supports working in its favor.
The S&P 500 is coming off its best weekly performance since April, while strong second-quarter earnings have helped reinforce confidence in corporate fundamentals. Investors also remain hopeful that negotiations involving Iran and Oman can eventually lead to an agreement reopening the Strait of Hormuz, which could ease pressure on oil prices and inflation.
The weaker July employment report has also reduced expectations for an immediate Fed rate hike. Fed funds futures now imply roughly a 50% chance of a September hike, down from 67% a week earlier, according to CME Group’s FedWatch tool.
However, the biggest threat to the bullish setup is the renewed rise in oil prices and what it could mean for inflation. WTI crude settled 5.1% higher at $82.13 a barrel Monday, while Brent climbed 5% to $87.72, as uncertainty over the Strait of Hormuz persisted.
That leaves the Federal Reserve facing a difficult combination of weaker employment and elevated energy-driven inflation. The upcoming CPI and PPI reports could therefore become especially important: softer inflation could reinforce expectations for steady rates, while a hotter reading could revive concerns about further tightening.
S&P 500 futures were almost unchanged early Tuesday.
How The Previous Bet Played Out: The Aug. 10 Polymarket contract attracted only about $14,364 in trading volume, well below the heavier activity seen during several of the market’s more volatile sessions in recent weeks. The S&P 500 opened at 7,751.74, slightly below Friday’s close — and therefore the contract resolved “Down.”
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