Trump says Iran war "close to over" amid hopes for more negotiations
Investing.com -- Wall Street ended higher on Tuesday, with the benchmark S&P 500 index’s record closing level now in sight. Sentiment was boosted by hopes for more Middle East ceasefire talks, gains in growth stocks, and a significantly better-than-anticipated U.S. producer inflation report.
The S&P 500 climbed 1.2% to close at 6,966.51 6,967.63 points, just about 12 points shy of its record close. The gauge on Monday erased all losses since the start of the Iran war.
The tech-heavy NASDAQ Composite advanced 2% to settle at 23,639.08 points, and the blue-chip Dow Jones Industrial Average added 0.7% to conclude at 48,535.81 points.
"There are three key drivers to market performance: 1) strong corporate earnings, 2) better than forecast inflation data, and 3) a general belief that a deal between the U.S. and Iran is going to happen," Oliver Pursche, senior vice president at Wealthspire Advisors, told Investing.com.
"Moreover, pessimism amongst investors is still high, which is considered a reliable contrarian sign by many. To us, the most critical things are overall economic data (i.e. inflation, employment, GDP growth), and corporate earnings - as long as these remain robust, markets will largely ignore distractions," Pursche added.
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Headline PPI cooler than expected
Even as the Middle East conflict dominated headlines, the spotlight on Tuesday was also on key inflation data.
According to the U.S. Bureau of Labor Statistics, the March producer price index (PPI) ticked up 0.5% month-on-month and 4.0% year-on-year, below the consensus estimates of 1.1% and 4.6%, respectively. Core PPI gained 0.1% month-on-month in March, and 3.8% year-on-year.
The 12-month increase in the headline figure was the largest since February 2023, driven mainly by a 8.5% month-on-month jump in the index for final demand energy prices.
The PPI print somewhat resembled the March consumer price index (CPI) data from last Friday, in that both reports showed a big impact of surging oil prices due to the Iran war on headline figures, but not as much on core numbers, which exclude food and energy.
"Interestingly, the Producer Price Index (PPI) core number – the less volatile data series that excludes food and energy – is indicating a slowing down of the rate of inflation to 0.1% in March from 0.3% in February," Chris Zaccarelli, chief investment officer at Northlight Asset Management, said.
"Although the inflation spikes from increased oil prices could become a problem if they are prolonged, the fact that the core rate of change of underlying inflation – both at the consumer and producer price levels – is less than 0.3% is good news for the markets," Zaccarelli added.
The impact of the war in economic projections also showed up in global data on Tuesday. According to the International Monetary Fund’s (IMF) latest world economic outlook, global growth is now projected to slow to 3.1% this year and 3.2% in 2027.
"After withstanding higher trade barriers and elevated uncertainty last year, global activity now faces a major test from the outbreak of war in the Middle East," the IMF said.
Wall Street’s solid rebound in prior session
Wall Street’s main averages notched a solid rebound the previous day, as initial disappointment that a weekend round of talks between Washington and Iran did not yield an immediate agreement faded. President Donald Trump also noted that the White House had been contacted by Iranian officials and wants to "make a deal," adding that Iran will not have a nuclear weapon.
Trump on Tuesday told the New York Post that more talks "could be happening over the next two days" in Pakistan.
The standoff between the U.S. and Iran continued on Tuesday, although Reuters reported that both sides have been engaging with one another and there has been some forward motion toward a deal to make their two-week ceasefire permanent.
Trump has also noted that the White House had been contacted by Iranian officials who would like to "make a deal," adding that Iran will not have a nuclear weapon. Washington has reportedly demanded that Iran agree not to enrich uranium, a key part of the process of building a nuclear weapon, for 20 years.
Meanwhile, Pakistan, which has emerged as a key mediator between the U.S. and Iran, has offered to host a second round of discussions prior to the end of the ceasefire, according to reports. The first talks were held in Islamabad last weekend.
Elsewhere, the U.S., Israel, and Lebanon agreed to start direct negotiations at a "mutually agreed time and venue." Representatives from the three countries met in Washington, including U.S. Secretary of State Marco Rubio.
"This meeting marked the first major high-level engagement between the governments of Israel and Lebanon since 1993. The participants held productive discussions on steps toward launching direct negotiations between Israel and Lebanon," the U.S. Department of State said in a statement.
No ships make it past U.S. blockade of Hormuz
While the state of peace talks grabbed eyeballs, attention was also on the critical Strait of Hormuz, on which a U.S. blockade came into effect on Monday. The blockade potentially further restricts already shuttered oil flows through the vital waterway.
The U.S. Central Command on Tuesday said more than 10,000 sailors, marines, and airmen along with over a dozen warships and dozens of aircraft were helping to maintain the blockade on ships entering and departing Iranian ports.
"During the first 24 hours, no ships made it past the U.S. blockade and 6 merchant vessels complied with direction from U.S. forces to turn around to re-enter an Iranian port on the Gulf of Oman," CENTCOM said.
Oil prices were lower on Tuesday, amid guarded optimism for a deal to end the fighting in the Middle East. Brent crude futures, the global benchmark, were last down 4.2% to $95.20 a barrel, while U.S. West Texas Intermediate crude futures declined 7% to $92.14 a barrel.
The International Energy Agency said that oil demand was now expected to fall by 80,000 barrels per day this year, a marked drop from the 640,000 barrels per day year-on-year increase it had forecast in its previous monthly report.
The U.S. dollar, which has been viewed as a bastion for investors during the conflict, weakened slightly as well.
Trading business boosts JPMorgan, Citi results
Attention is now turning to earnings from major U.S. banks, including JPMorgan and Wells Fargo.
JPMorgan (NYSE:JPM) posted a quarterly profit and revenue beat, as the largest U.S. bank by assets was bolstered by recent market volatility that spurred on its trading business.
Along with the energy shock sparked by the war in Iran, investors have been grappling with ructions in stock markets caused by worries over disruptions from new artificial intelligence-powered tools. Trading desks at big banks like JPMorgan tend to benefit from increased movements in equities, as this can force clients to reposition portfolios and make more trades to hedge risks.
Still, JPM top boss Jamie Dimon flagged an "increasingly complex set of risks" around the wider economic outlook, including geopolitical tensions and wars, energy price fluctuations, murky global trade policies, large fiscal deficits and elevated asset prices.
Citi (NYSE:C), the third largest U.S. bank by assets, also posted a quarterly top- and bottom-line beat, helped by gains in its trading business.
JPMorgan stock ended 0.8% lower, while Citi climbed 2.7%.
Wells Fargo (NYSE:WFC), the number four U.S. bank by assets, missed quarterly revenue expectations. The lender’s quarterly interest income also came in worse than anticipated, a key metric that has been watched by investors since the Fed lifted an asset cap on the bank.
WFC stock shed 5.7%.
In other moves, Globalstar (NASDAQ:GSAT) stock jumped 9.6% after the satellite company agreed to be acquired by Amazon (NASDAQ:AMZN) in an $11.57 billion deal.
Ayushman Ojha and Scott Kanowsky contributed to this article
