US stocks rose yesterday, parting ways with their European counterparts, and falling WTI crude prices diverged from spiking Brent crude prices as investors weighed optimism over an imminent US-Iran peace deal against dangers that the tenuous ceasefire could collapse.
Tech shares, lifted by surging chip stocks, put the Nasdaq out front, while the S&P 500’s gains were more modest. The blue-chip Dow was essentially unchanged.
“Regarding the US markets going into a long weekend, something of a risk-off mentality takes hold for fear that something might happen over the weekend, and that’s especially true right now, given all the global uncertainty,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
“We’re in a risk-on mentality right now, kind of led by the stocks with the best earnings growth so far this year.”
The fragile truce between the United States and Iran was imperilled after the US conducted what it called defensive strikes, which Iran called a “gross violation” of the seven-week ceasefire. Even so, both sides indicated progress toward an agreement that would stop the war and resume shipping through the blockaded Strait of Hormuz.
“It’s confusing, in that there was a lot of news over the weekend (suggesting) we’re close to a deal,” Tuz added. “Then this morning the headlines show the US is bombing Iran.”
Economic data yesterday showed the mood of the American consumer, whose spending accounts for about 70 per cent of the US economy, darkened slightly in May amid mounting inflation concerns.
The Dow Jones Industrial Average was unchanged at 50,577.23, the S&P 500 rose 65.33 points, or 0.87pc, to 7,538.80 and the Nasdaq Composite rose 377.47 points, or 1.43pc, to 26,721.44.
European shares dipped as fears that the US missile strikes in southern Iran could disrupt peace negotiations and extend the Strait of Hormuz blockade, the closure of which has sent energy prices soaring, sparking inflation worries.
Investors were also weighing comments from European Central Bank board member Isabel Schnabel, who said the central bank should hike rates in June, even if a US-Iran peace deal is reached.
MSCI’s gauge of stocks across the globe rose 5.36 points, or 0.48pc, to 1,123.51.
The pan-European STOXX 600 index fell 0.32pc, while Europe’s broad FTSEurofirst 300 index fell 8.67 points, or 0.34pc.
Emerging market stocks rose 9.23 points, or 0.54pc, to 1,720.64. MSCI’s broadest index of Asia-Pacific shares outside Japan closed higher by 0.44pc, to 884.47, while Japan’s Nikkei fell 162.10 points, or 0.25pc, to 64,996.09.
The US military’s strikes on Iran sent Brent crude prices spiking, after having settled 7pc lower in the previous session. US West Texas Intermediate (WTI) slid from Friday’s close. There was no WTI settlement on Monday due to the Memorial Day holiday.
US crude fell 3.2pc to $93.51 a barrel, and Brent rose to $99.67 per barrel, up 3.67pc on the day.
US Treasury yields fell as hopes for a deal to reopen the Strait of Hormuz helped soothe inflation fears.
The yield on benchmark US 10-year notes fell 8 basis points to 4.493pc, from 4.572pc late on Friday.
The 30-year bond yield fell 6.6 basis points to 5.0161pc from 5.082pc late on Friday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 6.3 basis points to 4.064pc, from 4.127pc late on Friday.
The dollar held steady amid fluctuating hopes for a near-term resolution to the Middle East conflict.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.1pc to 99.14, with the euro down 0.14pc at $1.1627.
Against the Japanese yen, the dollar strengthened 0.21pc to 159.22.
In cryptocurrencies, bitcoin fell 0.44pc to $76,863.78. Ethereum rose 0.3pc to $2,113.92.
Gold prices fell as energy-driven inflation stoked bets of higher US interest rates this year amid faltering hopes for a US-Iran peace deal.
Spot gold fell 1.03pc to $4,523.39 an ounce. US gold futures rose 0.1pc to $4,525.60 an ounce.
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