US stock futures meandered on Tuesday morning as uncertainty around the war in Iran, the bond market, and the Fed's next interest rate move largely kept buyers on the sidelines.

Futures on the Dow Jones Industrial Average (YM=F) and S&P 500 (ES=F) fell about 0.5%, while Nasdaq-100 (NQ=F) contracts dipped 1% after stocks closed August with solid gains.

Stocks entered September with double-digit year-to-date returns and earnings expectations that continue to rise. However, volatile oil prices and the potential return of Fed rate hikes have given investors reason to worry heading into the historically weakest month for stocks.

Crude oil prices remained elevated after the US and Iran returned to a hot war on Sunday, with Brent futures (BZ=F), the global benchmark, trading near $90 per barrel. Treasury yields have also stayed high, with the 10-year yield (^TNX) rising to 4.75%.

On Tuesday, the Job Openings and Labor Turnover Survey (JOLTS) will kick off a string of labor market updates this week, offering a look at hiring and quits ahead of the monthly jobs report on Friday. Data releases from S&P Global and the Institute for Supply Management will also give insight into manufacturing activity.

The gush of second quarter earnings reports may have slowed to a trickle, but releases from Dell (DELL) and Palo Alto Networks (PANW) will give insight into how big corporations are spending money on tech and cloud services.

Software just posted its second-best month since 2002. Meanwhile, chip stocks barely held on to a gain in August after being up nearly 10% mid-month.

The iShares Expanded Tech-Software Sector ETF (IGV) surged over 16% in August, while the iShares Semiconductor ETF (SOXX) finished up only 1%. The S&P 500 gained just over 2.5%.

For a while, chips were keeping pace. But in the final two weeks of the month, SOXX gave back most of its rally while software kept pushing higher.

And chips weren't alone.

The companies supplying the physical guts of the AI boom — electrical equipment, power infrastructure, networking gear, and construction — had all surged into mid-August. Then those trades rolled over together, while software kept climbing.

That extended a record divergence between software and chip stocks that was already opening up earlier in August.

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Yahoo Finance's Pras Subramanian reports:

In something of an unexpected consequence, Japanese automakers Toyota (TM) and Honda (HMC) have more to lose than any US automaker from President Trump's threatened tariffs on Canadian-built vehicles.

In a note to clients, JPMorgan Securities' head of global auto equity research Jose Asumendi noted that Canadian-built vehicles accounted for nearly a quarter of Honda's US sales last year, and 17% of Toyota's. 

Trump has threatened to impose 50% tariffs — double the current 25% rate — on autos, trucks, and car parts imported from Canada starting Jan. 1, 2027. The conventional thinking had been that Big Three automakers GM (GM), Ford (F), and Stellantis (STLA) would suffer the biggest financial hit from tariffs on Canadian goods.

But the two Japanese carmakers produce more than three-quarters of all cars made in Canada, per Reuters, and new tariffs could force them to shut some of their Canadian assembly lines because production would be economically unfeasible.

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September could be a bumpier month for stocks, if history is any guide.

According to Carson Group's Ryan Detrick, September is the weakest month of the year for stocks. The S&P 500 (^GSPC) is down 0.6% on average during the pumpkin spice month and generates a positive return only 45% of the time. Along with February, September is the only other month of the year with a negative return on average.

Volatility also tends to spike, with this year's midterm elections throwing another wrench into things.

But these are just trends, and seasonality isn't what's driving markets. While LPL Financial chief technical strategist Adam Turnquist expects more volatility ahead, it could also present some buying opportunities for investors.

"There's a lot of macro variables right now that I think can fuel upside in volatility," Turnquist told Yahoo Finance on Monday, citing geopolitical tensions and rising bets of a Fed rate hike.

"The earnings story is great, but we're not in that chapter right now for the market until we get to the next reporting season," Turnquist added, "so I do think the setup here, base case, [is] higher volatility and potentially a buying opportunity if we get some drawdown."

Economic data: S&P Global US manufacturing PMI, August final reading (53.3 expected, 53.2 previously); ISM manufacturing, August (55.2 expected, 55.6 previously); ISM prices paid, August (71.2 expected, 71.1 previously); ISM new orders, August (57 expected, 56.7 previously); ISM employment, August (52.5 expected, 52.8 previously); Construction spending, month-on-month, July (0% expected, -0.1% previously); JOLTS job openings, July (7.3 million expected, 7.359 million previously); JOLTS quits rate, July (+2% previously); JOLTS layoffs rate, July (+1.1% previously); Dallas Fed services activity, August (6.6 previously); Omdia total vehicle sales, August (16.3 million expected, 16.33 million previously)

Earnings calendar: Palo Alto Networks (PANW), Dell Technologies (DELL), Medtronic (MDT), MongoDB (MDB)

Catch up on some top stories from overnight:

SEC chairman moves to give US states power over shareholder resolutions

Apple says OpenAI is destroying evidence in trade secrets case

Trump strikes Medicaid drug price deals with nine pharma firms

State Farm sued by Los Angeles County for allegedly mishandling wildfire claims

AI could cause global economic downturn, Andrew Bailey warns G20

The AFP reports:

Oil prices extended gains Tuesday amid fears of a fresh bout of military exchanges between the United States and Iran following a flare-up at the weekend and Donald Trump's warning that he will hit the country "hard".

The latest bout of strikes between the foes has further stoked worries about inflation that has put pressure on central banks to hike interest rates, which has in turn jolted equity markets.

After six months of war, the conflict remains at an impasse, with Tehran keeping the strategic Strait of Hormuz closed and Washington continuing a counter-blockade of Iranian ports.

The United States carried out strikes on an Iranian island in the waterway on Sunday, with Tehran quickly retaliating by attacking US military targets in the Middle East.

The exchange raised fears of a return to major hostilities, with the US president vowing to respond.

"We're going to hit them hard," Trump said, according to a Fox News reporter who spoke to him briefly. "There will be a response."

Read more.