Wall Street Finishes Nearly Flat as Iran War, Oil and Rate Fears Drive Trading

U.S. stocks recovered from sharp intraday losses Thursday but finished little changed as developments in the U.S.-Iran war, rising oil prices and climbing Treasury yields dominated investor attention.

By yourNEWS Media Newsroom.

The S&P 500 erased most of an earlier decline Thursday and closed essentially unchanged as investors weighed signs of possible negotiations between the United States and Iran against renewed concerns over energy supplies, inflation and interest rates.

Preliminary closing data showed the S&P 500 fell 2.20 points, or 0.03%, to 7,703.83. The Nasdaq Composite added 1.76 points, or 0.01%, to 26,937.79, while the Dow Jones Industrial Average dropped 162.41 points, or 0.32%, to 51,349.18.

The S&P 500 and Nasdaq had been trading at deeper losses before a report said U.S. and Iranian negotiators were considering a phased approach toward ending the war. Under the potential arrangement, Tehran would reopen the Strait of Hormuz while Washington would lift its economic blockade of Iran.

The possibility of negotiations emerged during a week in which U.S. and Iranian leaders exchanged sharp remarks at the United Nations General Assembly.

Energy markets remained a central concern for investors. Brent crude climbed more than 3% to nearly $107 a barrel after a Houthi missile attack on Saudi Arabia renewed fears that the conflict could disrupt oil supplies.

“This just reinforces the view that we’re dealing with one major market catalyst right now,” said Bill Northey, senior investment director at U.S. Bank Wealth Management. “It’s really all about oil and inflation and ⁠the effect on interest rates, and then the interest rate cascading across the capital markets.”

Treasury yields also moved higher Thursday, adding another source of pressure for equities. The yield on the 30-year Treasury bond reached its highest level since 2004. Rising yields can increase the relative appeal of government debt compared with stocks, whose returns are less certain.

The bond-market move came as investors reassessed the direction of Federal Reserve policy following economic data released Wednesday that indicated continued strength in business activity.

Those figures increased expectations that the Federal Reserve could raise interest rates again after lifting its benchmark rate by 25 basis points last week. Traders were pricing in a nearly 70% probability of another increase next month, according to the CME FedWatch Tool.

New York Federal Reserve President John Williams, a voting member of the Federal Open Market Committee, said Thursday that it was reasonable to believe the central bank could need to raise interest rates again before the end of the year.

Technology and artificial intelligence-related stocks produced mixed results as investors navigated the combination of higher yields and changing expectations for corporate growth.

Microsoft and Broadcom declined, while Advanced Micro Devices gained.

Meta Platforms advanced one day after the social media company introduced a small handheld device designed for use with its recently launched artificial intelligence assistant.

Oracle shares fell following a report that the company had issued a “force majeure” notice involving a New Mexico data center. Blue Owl, the developer of the project, also suffered a sharp decline.

Despite recent market volatility, valuations have moved lower. The S&P 500 has traded this week at just under 19 times expected earnings, its lowest valuation since 2023, according to LSEG data. Artificial intelligence-related market heavyweights have accounted for a significant portion of the recent increase in earnings expectations.

Investors were also watching developments at the White House, where President Donald Trump welcomed Chinese President Xi Jinping for a summit expected to emphasize symbolism while producing limited substantive progress on major disputes involving artificial intelligence, trade, Taiwan and the Middle East war.

Elsewhere in the market, MGM Resorts fell sharply after media mogul Barry Diller’s People Inc withdrew its proposal to acquire the casino operator.

Thursday’s trading underscored the competing forces confronting investors as markets respond simultaneously to geopolitical developments, elevated oil prices, inflation concerns, higher Treasury yields and the growing possibility of additional Federal Reserve rate increases.

I’ll continue using this same ground-up rewrite approach for the articles you submit.