Trump Backs Off Iran Bombing Threat, Sending Stocks Soaring and Oil Prices Tumbling
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 (1.9%) and the Nasdaq composite rallied 2.5%.
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.
A potential deal to end the war with Iran could reopen the Strait of Hormuz, sending oil prices lower ? U.S. benchmark crude fell 2.6% to $87.71 and Brent dropped 2.9% to $90.38, though both remain well above pre-war levels. The conflict has driven painful inflation, with U.S. wholesale prices rising more than expected in May. In response, the European Central Bank became the first major central bank to hike interest rates, a move aimed at curbing inflation but one that also risks slowing economic growth.
Higher interest rates put pressure on investments, especially those seen as overvalued ? and AI stocks have been at the center of the storm. After surging to records, they reversed sharply, dragging the broader U.S. market into volatile swings that have sometimes flipped direction by the hour. Critics warn that AI investment may have ballooned into a bubble, and with rate hikes now in the picture, the sector faces serious scrutiny over whether its valuations can hold.
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. Companies involved in the making of chips 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