Wall Street’s main indices rose on Monday after the United States and Iran paused hostilities, boosting risk appetite ahead of a week of major earnings, economic data and an interest rate decision.
A wide swathe of stocks sensitive to energy prices gained. United Airlines and Delta Air Lines advanced 3.3% and 2.2%, respectively. Cruise operators Royal Caribbean and Carnival climbed 1.9% and 3.6%, respectively.
A 6.7% slide in Brent crude prices to US$90.37 a barrel weighed on shares of energy companies. Occidental Petroleum and Exxon Mobil were down about 2% each.
Shipping through the Strait of Hormuz remains low
Markets ended last week rattled by escalating Middle East tensions, on worries that the conflict could fuel further price pressures ahead of the Fed’s monetary policy decision due on Wednesday. Despite the announcement of the pause in attacks over the weekend, shipping through the Strait of Hormuz remained low, with Iran still controlling the critical waterway.
The Fed, meanwhile, has offered few clues on monetary policy outlook since Kevin Warsh took over as chair. Investors expect rates to be left unchanged this week, but are pricing in at least 25 basis points of increase later this year, LSEG-compiled data showed.
“The Fed is not going to move this week. It would be difficult to justify a hike based on a short-term spike in oil prices,” said Thomas Hayes, chairman at Great Hill Capital.
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The Personal Consumption Expenditures Price Index for June is due a day after the central bank’s decision. The Fed’s preferred inflation gauge will likely be key in shaping market expectations for interest rates later this year.
Tech giants face scrutiny amid earnings season
At 9:57am ET, the Dow Jones Industrial Average rose 489.98 points, or 0.94%, to 52,437.23, the S&P 500 gained 40.53 points, or 0.55%, to 7,452.51 and the Nasdaq Composite advanced 144.57 points, or 0.59%, to 25,120.40.
Interest-rate-sensitive Russell 2000 small-cap index climbed 1.5%, while the CBOE Volatility Index dipped 0.75 points to 17.85.
Communication services led the gains on the S&P 500, with a 2.2% rise, as Alphabet rose 3%. The Fertilizers & Agricultural Chemicals index fell 1.7%, with CF Industries and Dow down about 3.2% each.
Earnings from “Magnificent Seven” companies Microsoft, Amazon.com, Meta and Apple will test the AI trade further this week. All these mega-cap stocks were up about 1% each.
Negative cash-flow reports from Alphabet and Tesla last week added to concerns about debt-fueled corporate spending.
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Volatile chip stocks have been mixed recently, with industry leader Nvidia dropping about 2%. Chinese chipmaker CXMT Corp’s stellar debut signaled intensifying competition for the US semiconductor industry.
The tech-heavy Nasdaq is down about 7% from its record high, while earlier this month the Philadelphia SE Semiconductor Index confirmed it has been in “bear market” territory since late June.
An index closing 10% below its most recent high is called a technical correction, while a 20% drop is referred to as a bear market.
Small gains across the board
Among other movers, US oilfield services company Baker Hughes rose 8.6% after reporting a stronger-than-expected second-quarter profit on Sunday.
Advancing issues outnumbered decliners by a 3.18-to-1 ratio on the NYSE and by a 3.43-to-1 ratio on the Nasdaq.
The S&P 500 posted 21 new 52-week highs and two new lows while the Nasdaq Composite recorded 69 new highs and 68 new lows.
