Stocks Surge to Best Day in Two Months as Trump Pulls Back Iran Bombing Threat, Oil Prices Tumble

S&P 500 jumps 1.8%, Dow leaps 929 points, and Nasdaq rallies 2.5% as easing Iran tensions spark hopes for renewed oil flows, cooler inflation, and a Fed rate pause?while AI and chip stocks swing wildly again.

U.S. stocks rallied to their best day in two months, and oil prices fell Thursday after President Donald Trump called off his threat to bomb Iran in the evening. That raised hopes for a potential deal that could get the global flow of oil going again.

The S&P 500 jumped 1.8%, coming off a back-to-back drop that had yanked it back to where it was in early May. The Dow Jones Industrial Average leaped 929 points, or 1.9%, and the Nasdaq composite rallied 2.5%.

Stocks jumped midday after Trump posted that talks with Iran's leadership had reached the highest level and that a signing announcement was imminent. Hopes for a deal that could reopen the Strait of Hormuz pushed oil prices down sharply, with U.S. crude falling 2.6% to $87.71 and Brent dropping 2.9% to $90.38?though Brent remains well above its pre-war level near $70. The relief comes after days of renewed U.S.-Iran strikes had threatened the fragile ceasefire.

War-driven oil prices have fueled inflation, with Thursday's wholesale price data coming in hotter than expected and the European Central Bank becoming the first major central bank to respond with a rate hike. Higher rates curb inflation but slow growth and pressure pricier assets like stocks and crypto?especially AI names, which critics warn may be overheated. Wild swings in AI stocks have driven the market's recent rollercoaster, with sentiment reversing by the hour amid fears the rally outpaced fundamentals.

A sustained drop in oil prices could allow the Federal Reserve to keep its main interest rate on hold this year, instead of hiking it as many traders suspected it may have to because of high inflation and a solid U.S. job market. Following Trump?s announcement, traders ratcheted back their bets for a possible increase to the federal funds rate this year, according to data from CME Group.

AI stocks had already been rolling back up their roller coaster early Thursday, before Trump made his announcement on Iran. Marvell Technology climbed 11.1%. It?s coming off a manic stretch where it plunged 16.7%, soared 9.6% and then fell more than 5% for two straight days. Just before that, it had a one-day surge of 32.5% that was its best in history when Nvidia CEO Jensen Huang suggested it could be ?the next trillion-dollar company.? It was worth a bit more than $190 billion at the time.

Companies involved in the making of chips, meanwhile, jumped to some of the market?s biggest gains. Lam Research leaped 12.7%, and KLA climbed 12.9%. They helped offset an 8.5% drop for Oracle. It reported a stronger profit for the latest quarter than analysts expected, but it also said it expects to raise $40 billion in cash this fiscal year through borrowing and sales of its stock. That comes after it raised $48 billion last fiscal year to help pay for AI investments.

In stock markets abroad, indexes rose modestly in Europe following a mixed finish in Asia. London?s FTSE 100 rose 0.5%, and Hong Kong?s Hang Seng fell 0.7% for two of the world?s bigger moves.

In the bond market, Treasury yields eased sharply as falling oil prices meant less upward pressure on inflation. The yield on the 10-year Treasury dropped to 4.45% from 4.55% late Wednesday, which is a significant move for the bond market.

Powered by Capital Market - Live News