Wall Street Set for Gains as Iran Peace Hopes Hold: Markets Wrap
(Bloomberg) — US equity futures gained and Treasuries rallied as investors remained hopeful that the latest clashes between Iranian and US forces won’t derail talks to end the Middle East conflict.
S&P 500 futures rose 0.7%, signaling a stronger open for the US stock market after Monday’s Memorial Day holiday. Nasdaq 100 contracts gained more than 1% as Magnificent Seven big tech shares rallied in premarket trading. Both indexes, supercharged by the artificial intelligence trade, are within 0.4% of this month’s record closes.
The 10-year Treasury yield fell more than seven basis points and the dollar was steady after dropping against major peers in the previous session.
Investors are largely shrugging off a rebound in Brent crude prices after the US hit Iranian ships and missile launch sites, and Iran’s Tasnim news agency said the Islamic Revolutionary Guard Corps had fired at a US F-35 fighter jet. Israel also threatened to intensify strikes against Hezbollah in Lebanon. While the latest headlines cloud prospects of a swift resumption in oil flows through the Strait of Hormuz, investors appear optimistic that peace talks can still progress.
“The main driver of the mood music is the story in Iran,” Mizuho Bank Ltd. strategist Jordan Rochester said. Despite the strikes and belligerent rhetoric from Iran, “both sides are closer than they have been to date to getting something over the line. The US has made it clear it does not want the kinetic action to re-start,” he said.
US authorities have described their strikes as defensive in nature, following President Donald Trump’s comment on Monday that talks were “proceeding nicely.” And despite Tuesday’s increase, Brent is holding under $100 a barrel and is on track for a drop in May after rising in the previous two months.
Meanwhile, shares in rocket and satellite companies rallied in US premarket trading, extending recent gains. The sector has advanced since SpaceX filed publicly for what stands to be the largest-ever initial public offering. Among the movers, Redwire Corp. climbed 15%, MDA Space Ltd. jumped 13% and Firefly Aerospace Inc. rose 11%.
Europe’s benchmark Stoxx 600 index handed back some of Monday’s 1% advance, with BP Plc leading the losses after the oil major announced the removal of its chairman over governance concerns.
Investors are also closely watching the outlook for Federal Reserve policy, with expectations growing that the central bank will need to keep policy tight after the oil-price jump spurred the biggest inflation surge since 2023. A number of officials have abandoned their easing bias, while Trump — who has repeatedly called for interest-rate cuts — said on Friday he wanted new Chair Kevin Warsh to lead the Fed independently.
However, rate setters will need to juggle high prices with signs of a weakening economy, as a business activity index compiled by the Philadelphia Fed came in weaker than forecast.
Later in the day a sale of two-year Treasuries will test investor appetite for the rate-sensitive short-maturity debt. An inflation gauge due later this week is expected to show annual price growth ticking up further in April, potentially reinforcing expectations that policy will stay tight.
With the Middle East de-escalation lifting equity sentiment, “one might have expected to see the dollar weaker across the board – but it has been holding up quite well,” Chris Turner at ING Bank NV “We suspect this is being driven by the view that the Federal Reserve is about to turn less dovish.”
Corporate News:
BP Plc shares fell as much as 9.3% after the oil company’s board removed Chairman Albert Manifold from his role, citing serious concerns about governance standards, oversight and conduct. Eli Lilly & Co. shares rose 1.3% in premarket trading after the drugmaker agreed to buy three vaccine developers for as much as $3.8 billion, marking its re-entry into the infectious disease space. Ferrari NV shares fell after the Luce, its first fully electric vehicle, received disappointing reviews. AutoZone shares fell in premarket trading after the auto parts maker’s third-quarter comparable sales fell short of Wall Street’s expectations. Melrose shares fell as much as 7.3%, most since Feb. 27, after authorities ordered precautionary evacuations around the company’s GKN Aerospace facility in California following a thermal issue with a storage tank. Asia-exposed semiconductor companies rallied in premarket trading on optimism over a potential breakthrough in technology by China’s Huawei. Chinese semiconductor stocks rose in Hong Kong. Xiaomi Corp.’s quarterly profit tanked more than anticipated after sharp increases in memory prices exacted a heavy toll on the Chinese firm’s smartphone business. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.7% as of 8:34 a.m. New York time Nasdaq 100 futures rose 1.2% Futures on the Dow Jones Industrial Average rose 0.5% The Stoxx Europe 600 fell 0.2% The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1636 The British pound fell 0.2% to $1.3473 The Japanese yen fell 0.2% to 159.20 per dollar Cryptocurrencies
Bitcoin fell 0.3% to $76,971.73 Ether rose 0.4% to $2,116.53 Bonds
The yield on 10-year Treasuries declined eight basis points to 4.48% Germany’s 10-year yield advanced three basis points to 2.98% Britain’s 10-year yield declined four basis points to 4.86% Commodities
West Texas Intermediate crude fell 4.1% to $92.61 a barrel Spot gold fell 1.4% to $4,508.44 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Anand Krishnamoorthy.
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