U.S. Stock Market Sees Significant Gains Amid Eased Tensions with Iran
NEW YORK (AP) — The U.S. stock market experienced a remarkable resurgence on Thursday, achieving its most robust performance in two months, coinciding with a decline in oil prices.
This rally was spurred by President Donald Trump’s decision to withdraw his threat to launch a military strike against Iran, consequently fueling optimism for a potential diplomatic resolution that may restore the global oil supply chain.
The S&P 500 surged by 1.8%, rebounding from consecutive declines that had brought it back to early May levels. The Dow Jones Industrial Average soared 929 points, reflecting a 1.9% increase, while the Nasdaq composite escalated by 2.5%.
Midday trading showcased an immediate uptick in stock values following Trump’s announcement on his social media platform, stating that “discussions with the Islamic Republic of Iran have reached the highest echelons of Iranian leadership and received approval,” with the timing and location of a formal agreement to be revealed shortly.
A potential accord to terminate hostilities with Iran could reopen the strategic Strait of Hormuz, facilitating the transport of crude oil from the Persian Gulf to international markets.
As a result, the price per barrel of benchmark U.S. crude diminished by 2.6%, settling at $87.71, while Brent crude, the global standard, fell by 2.9% to $90.38, albeit remaining above the approximate $70 threshold observed prior to the onset of the conflict.
Fears had mounted in recent days as the U.S. and Iran engaged in retaliatory strikes, jeopardizing a precarious ceasefire that has persisted for over a month.
Soaring oil prices linked to the Iranian conflict have exacerbated inflationary pressures, culminating in a report indicating that wholesale prices in the U.S. rose in May at a rate exceeding economists’ predictions.
This inflationary trend extends globally, prompting the European Central Bank to become the first major financial authority to elevate interest rates in response.
While elevated interest rates can temper inflation, they simultaneously impede economic growth and diminish valuations across various investment classes, including equities and cryptocurrencies.
Such rates particularly affect investments perceived as overvalued, with some observers branding the artificial intelligence sector as a speculative bubble, having escalated to unsustainable heights.
The U.S. stock market has been in a state of flux lately, driven by erratic movements in AI stocks. These shares have oscillated dramatically within short intervals, transitioning from euphoric highs to sudden downturns, raising concerns about whether their meteoric rise has been excessive, driven by AI fervor.
Even prior to Trump’s Iran pronouncement, AI stocks were on the rebound. Notably, Marvell Technology surged by 11.1%, rebounding from a highly volatile period in which it had previously plummeted 16.7%, soared 9.6%, and endured back-to-back declines exceeding 5%.
In an extraordinary single-day increase of 32.5%, it achieved the most significant rise in its history following comments from Nvidia CEO Jensen Huang about its potential to become “the next trillion-dollar company.” At that moment, its market capitalization exceeded $190 billion.
Other semiconductor-related entities registered substantial gains, with Lam Research climbing 12.7% and KLA escalating by 12.9%.
Despite this upward trend, Oracle experienced an 8.5% decline. While it reported stronger-than-expected quarterly profits, the company announced plans to raise $40 billion through borrowing and stock sales to fund its AI ventures, building upon the $48 billion it raised the previous fiscal year.
Recently, numerous companies have faced market punishment for announcing substantial expenditures on AI amidst skepticism regarding their potential to yield the anticipated returns and efficiencies.
At the conclusion of trading, the S&P 500 gained 127.31 points, reaching 7,394.30. Similarly, the Dow Jones Industrial Average increased by 929.97, closing at 50,848.75, while the Nasdaq composite advanced by 640.16 to 25,809.66.
In the bond market, Treasury yields experienced a notable decline, driven by falling oil prices that alleviated inflationary impulses. The yield on 10-year Treasuries contracted to 4.45% from 4.55%, marking a significant movement in the bond landscape.
A sustained reduction in oil prices may enable the Federal Reserve to maintain its primary interest rate without increases this year, in contrast to earlier trader expectations of a hike due to rising inflation and a robust U.S. labor market.
Following Trump’s remarks, traders recalibrated their outlook on potential federal funds rate adjustments for the year, as indicated by data from the CME Group.
Under the leadership of its new chair, Kevin Warsh—appointed by Trump—the Federal Reserve might even contemplate resuming interest rate reductions, contingent upon diminished inflationary pressures.
Smaller companies may derive the greatest advantage from more favorable interest rates, as many rely on borrowed capital for growth; the Russell 2000 index, comprising the smallest U.S. stocks, notably surged by 3%.
Across international markets, European indexes registered modest advancements following a mixed outcome in Asia. London’s FTSE 100 ascended by 0.5%, while Hong Kong’s Hang Seng dipped by 0.7%, showcasing among the most significant shifts globally.
Source link: Apnews.com.
