Major stock indices opened lower on Monday as a jump in oil prices and rising US Treasury yields weighed on markets at the start of a new trading week.

The Dow Jones Industrial Average fell 0.71%, the S&P 500 dropped 0.44%, and the Nasdaq declined 0.48%.

Newmont dropped 4.97%, ServiceNow fell 4.00%, Kraft Heinz slid 3.82%, Freeport-McMoRan lost 3.78%, Salesforce declined 3.69%, and Datadog fell 3.47%.

Among the "Magnificent Seven": Nvidia rose 2.29%, Apple gained 0.26%, Tesla fell 0.83%, Google dropped 1.01%, Meta Platforms declined 1.05%, Amazon fell 1.63%, and Microsoft dropped 2.16%.

Brent crude oil futures climbed more than 2% to $106.55 per barrel, while WTI West Texas crude also rose about 2% to $94.46 per barrel. US President Donald Trump rejected Iran's conditional ceasefire proposal.

US Treasury yields extended last week's sharp upward move. The benchmark 10-year Treasury yield broke above 5.2%, and the 30-year Treasury yield surpassed 5.5%, with both sitting in multi-year high ranges.

In Asian markets, Japan's Nikkei 225 closed down 0.73%; South Korea's KOSPI plunged 2.7% to close at 6,889.74; Australia's S&P 200 rose 0.17%; and China's mainland CSI 300 closed down 2.22%.

European stocks, however, were broadly higher in early Monday trading. France's CAC-40 rose 0.37%, and the UK's FTSE 100 gained 0.46%, boosted by news of a new government loan program for first-time homebuyers that sent residential construction stocks surging.

Wall Street had just wrapped up a winning week, with tech and tech-related sectors performing notably well. Meta shares surged nearly 13% during that period as traders responded enthusiastically to the company's Muse AI agent; Microsoft gained more than 4%; and both Apple and Nvidia rose over 1%. Even as Treasury yields climbed to multi-year highs, tech stocks still posted gains.

With inflation remaining elevated, trading markets are increasing bets that the Federal Reserve will raise rates further. The benchmark 10-year Treasury yield hit its highest level since 2007, the 30-year Treasury yield touched a 2004 high, and the 2-year Treasury yield also jumped about 17 basis points last week.

Ed Yardeni, president of Yardeni Research, wrote: "The rapid rise in global two-year government bond yields sends a signal: amid renewed escalation of Middle East conflicts, oil prices may remain elevated for an extended period, creating inflationary pressure that requires major central banks to raise policy rates further. Unfortunately, persistently rising interest rates will also exacerbate the risk of large-scale government fiscal deficits globally."

Interest rates remain the market's focus this week, with a series of major economic data releases scheduled. The August Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, will be released on Wednesday; new US manufacturing data for August comes out Thursday; and the highly anticipated September nonfarm payrolls report is set for Friday.

Morgan Stanley: The US Treasury market is experiencing a "perfect storm." Morgan Stanley noted that economic growth resilience, sticky inflation, energy market intervention risks, a hawkish Fed shift, corporate debt issuance, fiscal deficits, and uncertainty over Treasury operations are all pushing yields higher. Since March, 2-year, 5-year, and 10-year Treasury yields have risen by roughly 120-150 basis points cumulatively; after the Fed's 25 basis point rate hike in September, the market has priced in nearly 100 basis points of additional tightening. Morgan Stanley believes the market may be overestimating the eventual magnitude of rate hikes, but there is a lack of fundamental catalysts in the near term to shift expectations toward a dovish stance.

Goldman Sachs: US stocks are showing a "strong index, weak confidence" pattern, and a catch-up rally may become the next phase's main theme. Goldman Sachs said the US stock market is currently displaying an unusual pattern — strong index performance but weak investor confidence — which suggests the market still has further upside potential, and stocks previously left behind by AI leaders may see a catch-up rally. The S&P 500 has gained 14% this year, but Goldman's US equity sentiment indicator has dropped to -0.9, matching its March low. Goldman strategist Ben Snider and his team wrote in a September 25 report that this reading means investors still have room to increase equity exposure if the macroeconomic environment improves. Meanwhile, Goldman's preferred market breadth indicator has fallen to its lowest level since the dot-com bubble era. For investors, this divergence could be significant if uncertainty around interest rates and economic growth subsides. Goldman believes there is room for both overall market gains and a rebound in lagging stocks, though unusually narrow market breadth could also lead to continued volatility in momentum trades.

JPMorgan is bullish on US tech stocks regaining capital favor: cooling positioning and declining valuations free up room. JPMorgan's strategist team believes that as positioning crowding decreases, earnings remain strong, and valuations become more realistic, tech stocks will regain some of the momentum lost since the end of the first half, and investors are expected to re-enter the sector. The team led by Mislav Matejka wrote in a Monday report that the pause in the rally over the past three months has resulted in cleaner positioning and less expensive share prices, and combined with rising capital expenditure and sustained strong earnings, "this should support investors re-engaging with the sector." Tech stocks still significantly lead the S&P 500 this year, but momentum has cooled in recent months amid concerns that massive AI spending may not deliver the returns optimists assume. Matejka wrote: "We doubt there will ultimately be a significant slowdown, because this race remains an existential, winner-take-all competition." JPMorgan said that while the magnitude of gains seen in the first half is unlikely to repeat, opportunities remain.

Retail investors retreat, institutions step in! Under the Treasury storm, "smart money" isn't withdrawing but advancing: $18.4 billion in options flows into US stocks, with AI still the top choice. Latest data shows institutional investors are taking over the driver's seat in the US stock market. After years of strong buying, retail traders appear to be gradually stepping aside. Meanwhile, Vanda Research data shows that large investors are still steadily holding stocks in the face of surging US Treasury yields. Vanda global market strategist Viraj Patel wrote in a Friday note to clients: "Amid heightened macro volatility this week, institutional investors have shown unexpected resilience." Data shows institutional investors' options inflows ($18.4 billion) were about three times the average for September in prior years. Patel said that despite 10-year and 30-year US Treasury yields climbing to their highest levels in over a decade, large-capital inflows continued to rise over the past five trading days. He believes this is a "fairly constructive signal" hidden within institutional investors' risk appetite beneath the broader risk-off narrative. He noted that amid market turbulence, institutional traders are selectively positioning in artificial intelligence (AI) related names.

Eaton Vance Municipal Bond Fund (EIM) was also mentioned in the market coverage.