MARKET SNAPSHOT

U.S. stocks fell as investors watched legal battles over the Fed's independence and President Trump's power to impose tariffs. Treausurys sold off, sending yields higher. The dollar strengthened even as gold futures hit new all-time highs on rate cut hopes. Oil futures rose.

MARKET WRAPS

EQUITIES

U.S. stocks began September on a downbeat note. The tech-heavy Nasdaq Composite led declines, closing down 0.8% after losing nearly 2% earlier in the day. The S&P 500 was 0.7% lower, while the Dow Jones Industrial Average dropped 249 points, or 0.5%.

The culprits: a selloff in government bonds driven in part by concerns over deteriorating fiscal outlooks in many nations, and jitters over President Trump's campaign to reshape the Federal Reserve.

Investors across the Atlantic have grown uneasy with higher government debt levels being used to finance defense and infrastructure spending at a time when the European economy has grown stagnant.

American investors have grown concerned with President Trump's campaign to reshape the Federal Reserve, and are awaiting a court ruling on whether his bid to fire Fed governor Lisa Cook will be allowed to proceed. The president has urged the central bank to cut interest rates, fueling concerns about inflation and longer-term risks to the Fed's independence.

The prospects for Trump's signature tariffs also look uncertain. An appeals court struck down the administration's "reciprocal" levies late last week, setting the stage for the case to head to the Supreme Court. The ruling also provoked worries in the U.S. bond market, as it could result in lower tariff revenues and a wider deficit, analysts said.

In Asia, stocks were mostly down.

Stocks slipped in China. The Shanghai Composite fell 0.4%. The Shenzhen Composite Index ended 2.0% lower, while the ChiNext Price Index declined nearly 2.9%.

In Hong Kong, the Hang Sang Index fell 0.5%.

Stocks in Japan gained as the Nikkei Stock Average added 0.3%.

In Australia, stocks fell. The S&P/ASX 200 Benchmark Index slipped 0.3%.

In New Zealand, the S&P/NZX 50 Index added 0.5%.

COMMODITIES

Oil futures rose as Ukrainian strikes on Russian infrastructure kept alive concerns of possible supply disruptions, while consensus built that OPEC+ will leave output targets unchanged at next weekend's meeting after unwinding 2.2 million of production cuts between April and September.

Russian refinery outages have a greater effect on European supply than in the U.S., contributing to the widening Brent spread over WTI, Ritterbusch said.

"Given the importance of distillates to the European market, gasoil and diesel are leading the way higher," the firm added.

Nymex diesel futures rose 4.6% and gasoil on ICE Futures Europe rose 3.2%. WTI settled up 2.5%, at $65.59, and Brent rose 1.5%, to $69.14.

Gold futures climbed, with anticipation of a rate cut this month giving fuel to push the ceiling higher.

Other factors like confusion over U.S. tariffs was also driving the latest push, said Peter Cardillo of Spartan Capital Securities

Cardillo said that gold futures going as high as $5,000 per troy ounce is a possibility. That would be an additional 40% gain in gold from where its trading today, which would be on top of the 36% gold has already gained this year, according to FactSet data.

Front-month gold futures closed up 2.2% to $3,549.40 a troy ounce, a new record. It's the fifth-straight session gold has risen.

TODAY'S TOP HEADLINES

Gold Just Hit a Record High. These Mining Stocks Are Glistening, Too.

Gold mining stocks were racking up gains on Tuesday, as the precious metal surged to a new high, building on its Labor Day gains.

Shares in Newmont climbed 0.9% ahead of the opening bell. Barrick Mining rose 0.8%, and Agnico Eagle Mines jumped 0.7%. The S&P 500 was 1.1% lower.

Eurozone Inflation Accelerates, Priming Continued Rate Pause by ECB

Annual inflation picked up pace a little in the eurozone last month, cementing expectations that the European Central Bank will leave interest rates unchanged for a second-straight meeting next week.

Consumer prices rose by 2.1% on year in August across the 20 nations that use the euro, European Union figures showed Tuesday. That marks an increase from the 2.0% rate of annual inflation booked in July. Core inflation, which strips out the more volatile shifts in the prices of energy and food, was unchanged at 2.3% on year last month.

"Policymakers at the ECB ..look certain to leave interest rates unchanged at next week's meeting and probably for several months beyond that," Capital Economics' Andrew Kenningham wrote in a note.

Bond Market Dynamics Set to Change as Investor Profile Shifts

As the cost of government debt spirals amid concerns over fiscal spending, the changing profile of bond investors looks set to further increase the likelihood of yield spikes going forward, according to analysts.

High inflation, increased government spending and elevated debt levels in major developed economies have pushed yields on 30-year government bonds in the U.S., Japan, Germany and the U.K. to multiyear highs in recent months.

On Tuesday, U.K. 30-year government-bond yields hit their highest level since 1998, German 30-year yields reached their highest level since 2011 and French 30-year yields rose to their highest since 2009. Bond prices and yields move in opposite directions.

Elliott Pushes for PepsiCo Turnaround With $4 Billion Stake

Activist investor Elliott Investment Management has built a roughly $4 billion stake in PepsiCo and is pushing the beverage and snacks giant to refranchise its bottling business and make other changes to boost its sagging share price.

PepsiCo has been struggling to win back soda drinkers after ceding market share to rivals. Its food business, once an engine of growth for the company, is also under pressure.

The challenges have weighed on PepsiCo's shares. The company's market value has shrunk to about $200 billion, a roughly 25% drop from a peak of $270 billion in May 2023.

Kraft Heinz Is Splitting Into Two Companies

After more than a decade together at Kraft Heinz, ketchup is breaking up with hot dogs.

The food giant said it plans to split its business into two companies, unwinding an industry megamerger that married two packaged-food behemoths.

In the breakup, one global company would focus on sauces, spreads and seasonings, while another would sell grocery staples in North America. The move aims to create businesses with more focus and less complexity, Kraft Heinz said, and deepens a reversal of the food industry's yearslong strategy of pursuing deals to build scale.

Klarna Seeks to Raise Up to $1.46 Billion From New York IPO

STOCKHOLM-Klarna said it could raise as much as $1.46 billion as it launched its long-awaited initial public offering Tuesday.

Klarna, a specialty lending and online payments provider, said 34.3 million ordinary shares will be offered, with the potential for a further 5.1 million shares offered in an overallotment option. Shares are expected to be priced at between $35 and $37 each.

The company would have a market value of around $14 billion at the top end of the pricing range based on the outstanding number of ordinary shares listed in its U.S. registration filing.

Elon Musk Says Optimus Robots to Make Up About 80% of Tesla's Value

Elon Musk said Tesla's humanoid robot Optimus will eventually be driving most of the company's value, as the tech giant shifts its focus to robots.

In a post on his X account, Musk wrote that "80% of Tesla's value will be Optimus" in response to a user asking about the Austin, Texas, company's long-term strategy.

In the second quarter, automotive revenue made up about 74% of total sales, but profit fell as its vehicle sales continued to slide downward. The company is also set to lose several electric-vehicle incentives due to a new U.S. budget bill, which Musk has criticized.