Wall Street ended the week lower, as oil prices and bond yields once again became major obstacles for stocks.

The S&P 500 fell 0.8% during the week, the Nasdaq declined 0.7%, and the Dow Jones lost 1.6%. Although the market recovered a significant portion of its losses on Friday, the week sent a clear signal: the combination of higher energy prices, persistent inflation, and elevated interest rates is leaving less room for stocks to continue moving higher with ease.

Oil changes the market landscape again

One of the main protagonists of the week was once again the energy market.

Brent crude briefly surpassed $109 per barrel, while WTI also approached and later moved above $100. The rally was driven by rising geopolitical tensions in the Middle East and growing risks to crude oil supplies.

The problem for markets is not only the price of oil.

When energy becomes more expensive, transportation costs and the prices of many goods and services also increase. This can keep inflation elevated for longer and make the Federal Reserve’s job more difficult.

Oil prices eventually pulled back on Friday, allowing stocks to recover some of their earlier losses. However, Brent still ended the week up nearly 8%, keeping energy prices as one of the main risks for the weeks ahead.

Inflation confirms the problem is not yet resolved

The other major development of the week came from the United States.

August CPI rose 0.4% month over month, in line with expectations, but core inflation showed greater pressure, increasing 0.3%, its largest monthly rise since April.

The data was not strong enough to trigger another wave of selling, but it reinforced the idea that inflation has not disappeared.

For the Federal Reserve, the challenge is becoming increasingly complex: on one hand, the labor market continues to show enough strength; on the other, prices remain above the 2% target.

And now oil is adding another source of pressure.

Bonds are competing with stocks again

Treasury yields also rose sharply during the week.

The 10-year Treasury yield reached approximately 4.99%, its highest level since 2023. The yield on the 30-year Treasury also reached levels not seen in more than two decades.

Why does this matter?

When bonds offer higher yields, they become more attractive relative to stocks. In addition, higher interest rates increase financing costs for companies and consumers and can reduce the present value of future earnings.

This particularly affects growth and technology companies, which rely more heavily on expectations of long-term earnings.

The Fed takes center stage

Following the inflation data and the move in bond yields, markets largely reached a conclusion about the Federal Reserve’s next meeting.

Expectations for a 25-basis-point rate hike in September increased significantly, with markets assigning a probability of around 85% to this scenario.

The decision will be particularly important because it comes at a time when oil prices are once again putting pressure on inflation.

For investors, the question is no longer simply what the Fed will do in September, but how long interest rates could remain elevated if inflation continues to prove persistent.

Technology and Nvidia face new uncertainties

The technology sector was not immune to the volatility.

During the week, several software and technology companies came under pressure as investors reassessed sector valuations and the impact of higher interest rates.

Artificial intelligence remains one of the market’s main growth drivers, but enthusiasm is no longer isolated from broader financial conditions.

The performance of major technology companies will be particularly important in an environment where investors must decide how much they are willing to pay for expectations of future growth.

Friday recovery, but a negative week

After four consecutive sessions of losses, Wall Street managed to end the week with a significant recovery.

On Friday, the S&P 500 rose 0.9%, the Dow Jones gained 1%, and the Nasdaq advanced 1%. Falling oil prices and inflation data that came in line with expectations helped ease some of the pressure.

But the rebound was not enough to erase the losses accumulated during the week.

The Dow ended the week down 1.6%, the S&P 500 fell 0.8%, and the Nasdaq declined 0.7%. Even so, all three indexes remain up by double digits so far this year.

A decisive week for the markets

Last week left several signals that will be important for the rest of September.

Oil showed that it can quickly become a problem for inflation again. Bonds demonstrated that yields can still rise significantly. And price data confirmed that the path toward inflation closer to 2% is far from guaranteed.

Now, all attention is focused on the Federal Reserve and its rate decision this week.

With markets simultaneously facing elevated oil prices, persistent inflation, and yields near 5%, the environment for stocks is becoming more challenging.

The message from the week is clear: Wall Street still maintains a positive trend for the year, but it increasingly needs favorable signals to justify further gains.

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Sources: Bloomberg, Reuters Energy, CNBC Markets, ISM Manufacturing Report