Wall Street stocks advanced yesterday following US President Donald Trump’s unilaterally declared ceasefire extension, and oil resumed its upward climb after Iran challenged the fragile truce by seizing two cargo ships in the Strait of Hormuz.
All three major US stock indexes were lifted by a broad rally, while gold advanced and US Treasury yields dipped.
“Things are kind of quieting down, and (investors) can focus on the economy and earnings for a little while, and not worry about bombs flying in the Middle East for now,” said Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest in Elmhurst, Illinois. “There’s still some concern that, yes, there’s a ceasefire, but it’s not resolved.
“All it does is postpone a decision.” Iran’s Revolutionary Guards seized two vessels for maritime violations just hours after Trump agreed to extend the ceasefire until negotiations are concluded. US stocks, initially battered by the war on Iran, have since made a full recovery, with the S&P 500 and the Nasdaq having reached all-time closing highs in recent sessions.
But geopolitical uncertainty lingers and a prolonged period of elevated oil prices remains a threat; about two-thirds of the S&P 500 companies that have reported quarterly earnings since the beginning of April have voiced concerns about energy prices in their analyst conference calls, according to a Reuters review of transcripts.
First-quarter earnings season is well underway amid lofty expectations. Analysts currently estimate year-on-year S&P 500 earnings growth of 14.4 per cent for the January-March period, according to the most recent LSEG data.
But the first quarter predates the Iran war. “I don’t think we’re going to feel the war’s full impact on earnings until we get second quarter reports in July,” Nolte added. The Dow Jones Industrial Average rose 364.21 points, or 0.75pc, to 49,513.59, the S&P 500 rose 59.43 points, or 0.84pc, to 7,123.44 and the Nasdaq Composite rose 283.12 points, or 1.17pc, to 24,543.08.
European shares were slightly lower following the extension of the US-Iran truce as Middle East strife continued to weigh on markets and investors assessed corporate earnings. Dozens of international firms have withdrawn guidance or signaled price hikes since the conflict began. MSCI’s gauge of stocks across the globe rose 3.98 points, or 0.37pc, to 1,070.44. The pan-European STOXX 600 index fell 0.23pc, while Europe’s broad FTSEurofirst 300 index fell 6.06 points, or 0.25pc. Emerging market stocks fell 8.34 points, or 0.52pc, to 1,607.14. MSCI’s broadest index of Asia-Pacific shares outside Japan closed lower by 0.57pc, to 822.53, while Japan’s Nikkei rose 236.69 points, or 0.40pc, to 59,585.86.
The dollar inched higher against the euro amid lingering geopolitical worries. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.06pc to 98.44, with the euro down 0.11pc at $1.1728. Against the Japanese yen, the dollar weakened 0.09pc to 159.23. In cryptocurrencies, bitcoin gained 3.97pc to $78,750.99. Ethereum rose 3.57pc to $2,400.37.
US Treasury yields dipped as investors remained cautious following the ceasefire extension. The yield on benchmark US 10-year notes fell 0.6 basis points to 4.286pc, from 4.292pc late on Tuesday. The 30-year bond yield fell 0.9 basis points to 4.8887pc from 4.898pc late on Tuesday. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 1.3 basis points to 3.792pc, from 3.779pc late on Tuesday.
Oil prices moved higher following reports of attacks on container ships in the Strait of Hormuz. US crude rose 2.09pc to $91.54 a barrel and Brent rose to $100.58 per barrel, up 2.15pc on the day.
Gold prices rose as geopolitical uncertainties eased, reducing liquidation pressure on the metal.
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