Wall Street Highlights: S&P 500, Nasdaq Selloff Stalls On Report Of US-Iran Talks Over Hormuz

The S&P 500 closed flat after spending much of the morning deeply in the red until Reuters reported on talks of a phased re-opening the strait, triggering a fleeting drop in oil prices from their earlier highs. The tech-heavy Nasdaq 100 also pared early losses to end the day flat. The Dow Jones Industrial Average fell 0.3%.

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"The frustration from bulls and bears alike is palpable, as we continue to play headline roulette," said Jonathan Krinsky, chief market technician at BTIG LLC.

The "herky, jerky" moves in the indexes Thursday afternoon haven't changed the underlying fundamentals challenging the market, like higher bond yields and inflation concerns, according to Michael O'Rourke, chief market strategist at JonesTrading Institutional Services LLC.

"You have algos that kick in when oil comes down and you have a lot of short covering, so I don't think there's a lot of confidence in the move," O'Rourke said by phone.

As rising oil prices worsen inflationary pressures, equities continued to face headwinds from rising US Treasury yields, which extended gains from Wednesday, when the market saw one of the biggest one-day selloffs since President Donald Trump's April 2025 tariff rollout sent markets into a tailspin.

That has left yields at the highest levels since the Global Financial Crisis as traders wager the Federal Reserve is poised to keep raising rates, which threatens to exert a significant drag on large segments of the economy.

"Higher rates clearly putting pressure on equity markets and it's all about oil markets - they're ruling everything around us right now," Emily Roland, co-chief investment strategist at Manulife John Hancock Investments, said in a Bloomberg TV interview.

Homebuilders have had to slash prices with mortgage rates above 7%, though new home sales data came in at a stronger-than-expected pace. Initial jobless claims also remain near historic lows, data released Thursday show, underscoring the labor-market strength.

In tech, Oracle Corp. shares fell after the cloud technology company moved to shield itself from racking up expenses on a massive New Mexico data center.

Meta Platforms Inc. shares gained after unveiling a palm-sized, gadget called Muse Charm late Wednesday, pushing deeper into the AI devices market, on the heels of the rollout of the Muse app. The stock provided the biggest boost to both the S&P 500 and Nasdaq 100.

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But the dominant driver has been oil prices, which spiked sharply early in the trading session after Iran's supreme leader said Tehran may expand the war to the Indian Ocean if the US or Israel attacks again. Oil ended not far its intraday high, with Brent crude around $107 a barrel. Record US diesel prices have Trump administrator discussing potential export curbs with domestic refineries, a move that could have unexpected consequences.

Sectors in Focus

• Watch financials and interest-rate sensitive sectors Friday with a University of Michigan sentiment and inflation expectations survey due.
• Industrials may be in focus with durable goods and capital goods orders expected before market open.