Iran jitters lift oil and drag the Nasdaq down 1.2%

Good morning. AI stocks dragged Wall Street lower last night. The Nasdaq fell 1.24% and the S&P 500 lost 0.46%, while the Dow barely moved. Considering Dow futures had been down nearly 480 points before the open, the damage was limited.

The trigger was Iran. After reports that the White House is weighing strikes on Iran before the November 3 midterms, oil and European gas prices jumped. Higher oil stokes inflation worries, and with rates already high, richly valued growth stocks like AI names feel it first. The nerves eased a bit when President Trump said talks with Iran had been productive and he would hold off attacks until after the election.

The bond market finally caught its breath. Treasury yields, which had hit 24-year highs, eased as strong foreign demand showed up at both the 10-year and 30-year auctions. Some options traders are even starting to call a bottom. Ray Dalio, though, warned that the cushion that earnings growth has provided against rising yields is thinning.

On prices, consumers' one-year inflation expectations rose to 3.9%, the highest in three years, and the New York Fed attributed a good chunk of the rise to tariffs. The 30-year fixed mortgage rate climbed to 7.4%, up for a seventh straight week.