Asian equities fell from record highs after conflicting signals from the US and Iran on prospects for a deal to end the war. Crude oil gained.
MSCI’s Asia Pacific equities gauge fell 0.2%, snapping a five-day rally fueled by surging technology shares. US equity-index futures pared earlier gains following fresh US strikes in Iran. Brent crude climbed 2.2% to $96.30 a barrel as the lack of a deal to end the war kept the Strait of Hormuz shut, disrupting the flow of oil and gas.
The dollar strengthened and Treasuries dropped as sentiment soured after the White House dismissed an Iranian media report suggesting peace negotiations were advancing toward ending the war. The benchmark 10-year Treasury yield climbed two basis points to 4.50%. Bonds in Australia and New Zealand also declined.
While resilient demand for the artificial-intelligence trade has repeatedly pushed global equities to record highs, elevated energy prices and the risk of renewed inflation have kept bond investors cautious. Attention now turns to Thursday’s release of the April personal consumption expenditures index — the Fed’s preferred inflation gauge — for clues on interest rates and the next turn for markets.
“The stock market has enough confidence that a resolution with Iran will eventually come to light, even if it’s not immediate,” said Alexander Guiliano at Resonate Wealth Partners. “While it may seem like stocks have moved too fast, we saw a garden variety correction only two months ago, which helped to reset sentiment.”
President Donald Trump said he was “not satisfied” in negotiations with Iran, damping expectations for an imminent breakthrough. Trump asserted that no one nation would control the Strait of Hormuz, highlighting a key sticking point in resolving the conflict as it enters its fourth month.
US Secretary of State Marco Rubio said that “we’ll see over the next few hours and days whether progress could be made” on Iran.
US stocks ended Wednesday’s session roughly where they started, as investors took profits in tech names but remained optimistic that an end to the war in the Middle East was near.
Despite the day’s see-saw trading, Wall Street strategists remain largely bullish on stocks, with the S&P 500 hovering near all-time highs.
An “exceptionally strong first-quarter reporting season” prompted Goldman Sachs Group Inc. strategists led by Ben Snider to raise the year-end target for the S&P 500 to 8,000 points from a previous forecast of 7,600. Goldman joined Morgan Stanley and Deutsche Bank AG in seeing the benchmark end the year at 8,000 points.
The technology sector remained in focus after some mixed earnings. Salesforce Inc. gave a lukewarm outlook and HP Inc. gave a profit outlook that failed to ease the chip-cost concern. Snowflake Inc. shares jumped almost 30% in late trading after the software maker gave a stronger-than-expected annual outlook. Marvell Technology Inc. delivered a quarterly forecast that exceeded analysts’ estimates.
Elsewhere, elevated energy prices and inflation risks are clouding the outlook for central banks as traders turn their attention to Thursday’s economic data. The PCE price index rose 3.5% from a year earlier in March and economists anticipate an increase to 3.8% in April. That’s well above the long-run rate of 2% targeted by the Fed.
Fed Vice Chair Philip Jefferson said he expects inflation to cool later this year as the effects of tariffs and higher energy costs wear off, though he warned inflationary risks remain tilted to the upside. Earlier, Fed governor Lisa Cook said inflation is headed in the wrong direction and she would be prepared to raise interest rates if that persists.
“I want to be clear about my risk assessment: The risks remain tilted toward higher inflation,” Cook said Wednesday.
