US equities posted a fourth straight day of gains even as President Donald Trump said Iran could be “taken out” Tuesday night, while oil prices climbed. The S&P 500 Index rose 0.4% and the Nasdaq 100 Index added 0.6%. The Cboe VIX Index hovered around 24.
President Donald Trump ramped up his threats ahead of a deadline he's imposed for Iran to re-open the Strait of Hormuz or face further attacks on civilian infrastructure, while Tehran rejected a ceasefire proposal.
“We've gotten discussion on both the carrot and the stick — ceasefire talks and a resumption of bombing,” said Steve Sosnick, chief strategist at Interactive Brokers. “Stock traders and oil have been relatively unperturbed except for a brief period early in President Trump's speech as they obviously remain hopeful that hostilities won't resume quickly.”
Separately, investors digested weaker-than-expected economic data. The US service economy expanded in March at a slower pace as employment shrank by the most since 2023 and input prices accelerated sharply. The ISM services index fell 2.1 points to 54, dragged down by weaker employment and less growth in business activity.
To Kevin Brocks, a director at 22V Research, it isn't a surprise that the Iran war is dragging on business sentiment. “There is little new news here for the Fed,” he added.
Meanwhile, crude oil prices edged higher following a rally on Friday. The Organization of the Petroleum Exporting Countries, or OPEC+, warned Sunday that damage to Middle East energy infrastructure could have lasting effects on supply even after the conflict ends, as the group approved a largely symbolic increase in output quotas for next month.
Brent crude has gained about 80% and WTI is up 96% since the start of the year. History suggests sustained oil shocks carry significant downside risks for equities. When crude prices surge more than 60% and remain elevated for several weeks, the S&P 500 Index has historically declined at least 20%, and sometimes more, according to data compiled by Matt Maley, chief market strategist at Miller Tabak + Co.
US stocks may be bottoming out, according to Morgan Stanley, which recommends starting to add exposure, especially in cyclical sectors and high-quality growth names. “We believe the S&P 500 is carving out a low and think it makes sense to start adding length in cyclical and quality growth trades where earnings remain strong, valuation has compressed, and sentiment is negative,” strategists including Michael Wilson wrote in a note.
According to veteran strategist Ed Yardeni, technology stocks have returned to attractive levels for investors willing to play the long game after a pullback from last year's record highs.
Meanwhile, positioning data points to a tentative shift in sentiment. In the week through quarter-end Tuesday, institutional investors were moderate buyers of US equities, with flows at 1.2 standard deviations above average — the first net buying in five weeks — following heavier selling through much of March, according to Goldman Sachs Group Inc.'s trading desk.
“We observed moderate global equity buying, strongest in US markets, led by hedge funds through a mix of new long positions and short covering,” Goldman's Paul Leyzerovich wrote. Goldman traders anticipate systematic funds to buy about $55 billion of global equities over the next month, including about $20 billion in US stocks.
From a technical perspective, the S&P 500 remains below its 50-, 100- and 200-day moving averages. BTIG's Jonathan Krinsky noted that the index has also spent 10 consecutive trading days below its 200-day moving average while being within 7% of a 52-week high — a combination that has never occurred in the last 20 years.
“While many participants continue to look through the Middle East tensions assuming a swift move back to prior highs, the reality is we are lacking the fully oversold conditions that typically accompany a breach of the 200 DMA,” Krinsky wrote in a note Sunday. “We continue to see downside risk toward 6,000-6,150 as long as we remain below ~6,800 level.”
Attention now turns to upcoming economic data, with the release of the March consumer price index on Friday. Economists expect a 1% monthly increase, which would mark the largest gain since 2022, following a roughly $1-per-gallon rise in gasoline prices tied to the Iran conflict.
In individual stocks, Bank of New York Mellon Corp. and Robinhood Markets Inc. shares gained after the firms were tapped by the US Treasury to support the implementation of the new Trump Accounts program. AMC Entertainment Holdings Inc. shares rose after the movie-theater operator said it delivered a “record-setting performance over the 5-day Easter holiday weekend.” Soleno Therapeutics Inc. rose about 32% after the Financial Times reported that Neurocrine Biosciences Inc. is in advanced talks to acquire the company.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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