Dow sheds 380 points as oil and rate-hike fears collide

Good morning. Wall Street closed August on a sour note, with the Dow dropping 380 points. The US and Iran traded strikes for the first time in about a month, oil climbed, and rate-hike worries piled on top.

Here is how the pieces connect. Pricier oil feeds inflation, and stubborn inflation gives the Fed more reason to raise rates. After Chair Warsh's speech last week, the odds of a September hike have risen into the 60s, and the 10-year Treasury yield hit its highest level of Trump's second term. Plenty of people push back, saying there is no clear data yet that justifies a hike.

Even so, the major indexes still finished August higher. Energy was the best-performing sector, while rate-sensitive utilities lagged. The catch is that barely more than half of S&P 500 stocks sit above their 50-day average, so some analysts warn that the market looks weaker underneath than the index suggests.

On the energy front, the new Venezuela joint venture is getting attention, but experts say real output gains are years away. That is why the White House is calling in refiners today to talk about short-term ways to bring down gasoline prices.