Stocks Fall as Oil Climbs With Iran Talks in Limbo: Markets Wrap
(Bloomberg) — A record-breaking rally in US stocks came to a halt as peace talks in the Middle East remained in limbo, sending Brent crude further above $100 a barrel.
Futures for the S&P 500 retreated 0.4%. The pullback suggests Wall Street is taking a breather after already surging 9% in April on the back of strong earnings and the longest-ever advance in chipmakers. Brent rose 0.9% to around $103 a barrel as the US and Iran kept blocking the Strait of Hormuz. The dollar advanced 0.2%, while Treasury yields climbed across the curve.
High-flying semiconductor manufacturers extended gains in premarket trading. Texas Instruments Inc. set the pace with a 9% jump on booming demand from data center builders. Software firms tumbled after ServiceNow Inc. said deals have been delayed by the war. Tesla Inc., meanwhile, fell 3.1% as it raised its spending forecast for an artificial intelligence and robotics push.
“A lack of progress on US-Iran negotiations may bring some reality check to equity markets after a strong rebound,” said Emmanuel Cau, head of European equity strategy at Barclays Plc. It’s “hard to see much more upside without more decisive progress on peace. Earnings so far are good, so at least that’s providing some fundamental backstop.”
US stocks have shaken off the turmoil from the Iran war that halted around 20% of global oil flows. Resurgent optimism around AI and strong corporate results have fueled the rebound as investors still expect a resolution to be within reach.
With the earnings season in full swing, the likes of Comcast Corp. and American Express Co. reported beats in profit estimates on Thursday. American Airlines Group Inc. warned it saw $4 billion in extra expenses due to higher jet fuel costs.
In Europe, equities dropped 0.3%, falling for a fourth day in the longest losing streak since January. As a net importer of oil and gas, the region remains more exposed to tremors from the Middle East, with not even a slate of robust earnings able to lift the mood. Beauty giant L’Oreal SA rose more than 8% in Paris after a strong sales beat. Nestle SA was 6% higher in Zurich.
“Markets are playing the theme that the Hormuz fallout will hit Asian and European economies harder than the US economy,” said Holger Schmieding, chief economist at Berenberg. “It also means that, once Hormuz reopens, Europe and Asia will outperform.”
Business Activity
In one of the first data points for April, business activity in the euro area unexpectedly shrank for the first time since 2024. The US reading later on Thursday will also be in focus as an early signal of how the economy is being impacted by higher oil prices.
“The broader data resilience has been a crucial factor supporting risk assets,” wrote Jim Reid, head of macro research and thematic strategy at Deutsche Bank AG. “Any sign of that changing would be significant, as it would take away one of the key pillars that’s prevented a more negative market reaction to recent geopolitical events.”
In the UK, gilt yields jumped after a rebound in the private sector backed the case of Bank of England interest rates. Traders have moved up their bets on BOE rate increases, and now price two quarter-point hikes this year, with a 50% chance of a third. That’s up from 35 basis points at the start of the week.
Corporate Highlights:
American Airlines Group Inc. beat Wall Street’s expectations for quarterly earnings amid robust demand, even as US airlines navigate rising fuel costs tied to the war in the Middle East. Blackstone Inc. reported a larger-than-expected jump in distributable earnings, boosted by a robust start to dealmaking before the war in Iran rattled investors. Comcast Corp. reported first-quarter financial results that exceeded analysts’ estimates with fewer losses among broadband customers, offsetting lackluster growth at its Peacock streaming service. Honeywell International Inc. reported first-quarter sales that missed analysts’ estimates, while agreeing to sell its Warehouse and Workflow Solutions business for an undisclosed sum. Netflix Inc. announced plans to buy back $25 billion in stock after the company’s shares dropped following a weak financial outlook. Taiwan Semiconductor Manufacturing Co. will hold off on deploying ASML Holding NV’s most cutting-edge lithography machines for chip production through 2029 to save money, dealing a potential setback to the Dutch maker of the costly equipment. International Business Machines Corp. posted quarterly sales in its software unit that were in line with estimates. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.5% as of 6:32 a.m. New York time Nasdaq 100 futures fell 0.5% Futures on the Dow Jones Industrial Average fell 0.8% The Stoxx Europe 600 fell 0.5% The MSCI World Index fell 0.2% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.2% to $1.1684 The British pound was little changed at $1.3497 The Japanese yen fell 0.2% to 159.74 per dollar Cryptocurrencies
Bitcoin fell 1.3% to $77,452.07 Ether fell 3.2% to $2,316.24 Bonds
The yield on 10-year Treasuries advanced one basis point to 4.32% Germany’s 10-year yield advanced one basis point to 3.02% Britain’s 10-year yield advanced five basis points to 4.96% Commodities
West Texas Intermediate crude rose 1.4% to $94.27 a barrel Spot gold fell 1.1% to $4,688.84 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Neil Campling and Subrat Patnaik.
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