Oil Prices Fall, Wall Street Indexes Edge Up on Hopes of US-Iran Resolution
Wall Street stock indexes edged up, oil prices tumbled and the dollar's safe haven appeal waned on Tuesday as investors looked past a U.S. blockade on Iran's ports to the prospect of an eventual resolution to the conflict.
Negotiating teams from the U.S. and Iran could return to Islamabad this week, four sources said, days after talks - held at the highest level between the two sides since the 1979 Islamic Revolution - ended in the Pakistani capital without a breakthrough.
U.S. President Donald Trump said Iran wants to make a deal, but added he would not agree to any outcome that allows Tehran to have a nuclear weapon.
The Dow Jones Industrial Average rose 0.47% to 48,448.92, the S&P 500 rose 0.58%, to 6,926.50 and the Nasdaq Composite rose 0.98%, to 23,411.15.
"Investors seem to be buying into the notion that it may take a while, but there is an off-ramp in the future to this war," said Art Hogan, chief market strategist at B Riley Wealth.
Gains in big tech stocks have helped push the S&P 500 back to pre-war levels. Europe's STOXX 600 has recovered ground and was last up 0.96% on the day, but is still below its close on Feb. 27, the day before the U.S. and Israel launched strikes on Iran.
Charu Chanana, Saxo's chief investment strategist, said markets were "trading hope, not resolution".
"The problem is that markets may be pricing the chance of de-escalation faster than the proof of it, so I would still expect a choppy, headline-driven tape rather than a clean risk-on trend," she added.
DOLLAR DIPS
The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, has fallen to within striking distance of its late February levels, sliding a further 0.29% on Tuesday to 98.05.
The dollar's safe-haven status had been generally nudging the currency higher since the beginning of the war.
Bank of America's monthly global fund manager survey, conducted from April 2 to April 9 and covering 193 asset managers overseeing $563 billion, showed sentiment was the most bearish it has been since June last year.
"Expectations for growth (are) down the most since March 2022, for inflation, the highest since May 2021. All contrarian - positive for risk assets so long as the ceasefire sends oil price below $84 a barrel, but not a 'close-eyes-and-buy'," strategists led by Michael Hartnett said.
OIL BACKS DOWN
Oil prices fell as expectations for further dialogue to end the war outweighed concerns over supply disruptions.
Brent fell to $95.02 per barrel, down 4.37% on the day, while U.S. crude lost 6.54% to trade at $92.60 a barrel. Both benchmarks had been trading above $100 a barrel just a day earlier, when the U.S. began a blockade of Iran's ports, angering Tehran and adding uncertainty about energy flows through the key Strait of Hormuz.
The Bank of America survey showed investors expect oil to be priced at $84 by the end of the year.
In China, data on Tuesday showed exports slowed in March as demand linked to an artificial-intelligence boom ran up against the effects of the war.
INFLATION CONCERNS BUOY TREASURY YIELDS
U.S. Treasury yields drifted lower, with the two-year yield US2YT=RR last down 0.5 basis points at 3.776% and the benchmark 10-year yield US10YT=RR 1.6 basis points lower at 4.281%.
Two-year Treasury yields, which typically move in step with expectations for rate cuts from the Federal Reserve, are still nearly 40 basis points higher than their late February levels, as rising energy prices fuel inflation concerns. Those have prompted investors to prepare for the possibility that major central banks reverse their expected course towards interest rate cuts or pauses, and instead tilt towards hikes.
(Reuters)
