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A screen displays the Dow Jones Industrial Average at the end of the trading day on the floor of the New York Stock Exchange in New York City on Sept. 22, 2021.BRENDAN MCDERMID/Reuters

U.S. shares fell on Monday, having whipsawed between gains and losses as soaring oil prices that hit multiyear peaks stoked fears about rising prices and tighter monetary policy, lifting the dollar to a near-three-year high against the yen.

A rally in basic material and energy shares on higher oil prices initially lifted major U.S. stock indices. But the gains faded as investors focused on the start of the U.S. corporate earnings season next week.

Some analysts anticipate businesses reporting slowing growth because of supply chain snags and rising prices. They warned that this could lead to a drop in U.S. stocks.

“Whether the final chapter of the mid-cycle transition ends with a 10 per cent or 20 per cent correction in the S&P 500 will be determined by how much earnings growth decelerates or has to outright decline,” Morgan Stanley analysts said in a note.

“We are gaining confidence in a sharper deceleration but the timing is more uncertain.”

The Dow Jones Industrial Average lost 0.72 per cent, the S&P 500 fell 0.69 per cent and the Nasdaq Composite dropped 0.64 per cent.

The pan-European STOXX 600 index was little changed, edging up just 0.05 per cent, while MSCI’s gauge of stocks across the globe shed 0.33 per cent.

Heading into Tuesday, the mood in Asia could also be hit by news that Chinese property developer Evergrande may miss its third round of bond payments in as many weeks and rivals Modern Land and Sinic became the latest scrambling to delay deadlines.

China’s bond markets slump again as new Evergrande deadline passes

China Evergrande Group bondholders are bracing for Monday’s coupon deadline

Oil prices, which had jumped on Monday on rebounding demand and cutbacks in supply, gave up some of their early gains but still ended the session higher.

Brent crude rose 1.5 per cent to US$83.65 a barrel, after climbing as high as US$84.60, its highest since October, 2018.

U.S. West Texas Intermediate crude also added 1.5 per cent to finish at US$80.52, after touching its highest since late 2014 at US$82.18.

Analysts are divided over whether energy supplies are tight enough to warrant oil testing US$100 a barrel, but most seemed to agree prices are likely to stay elevated in the short term.

That helped basic materials and energy stocks in the S&P 500. They jumped 0.96 per cent and 0.88 per cent respectively, Refinitiv data showed, outperforming the broader market.

Rising prices are also fuelling bets that major central banks will tighten monetary policy sooner rather than later, lifting the dollar to a near three-year peak against the Japanese yen.

In the United States, investors expect the Federal Reserve to begin tightening policy by announcing a tapering of its massive bond-buying next month. This has hobbled the yen, which is typically sensitive to interest-rate differentials.

The yen weakened 1.02 per cent against the greenback at 113.38 a dollar, and the dollar index rose 0.238 per cent.

A stronger dollar pushed the euro down 0.14 per cent to US$1.1551.

Gold, usually seen as a hedge against inflation, fell as a stronger dollar offset any inflation-driven gains. Spot gold dropped 0.2 per cent to US$1,753.42 an ounce. U.S. gold futures fell 0.15 per cent to US$1,753.60 an ounce.

Bitcoin, a barometer of investors’ risk appetites, receded a touch but was still up a solid 4.4 per cent.

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