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.”
Alexander Guiliano, Resonate Wealth Partners
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.
Background
The ongoing conflict in the Middle East, particularly involving Iran, has been a significant factor affecting global markets. The closure of the Strait of Hormuz, a critical passage for oil transportation, has led to disruptions in the oil supply chain, contributing to rising energy prices and inflation concerns.
As the geopolitical tensions continue to impact global markets, investors will closely monitor the upcoming economic data releases, especially the PCE index, for further insights into inflation trends and potential interest rate adjustments.
