Equities inch higher with semi stocks, oil up amid further Iran tensions
Market Overview and Key Drivers
By Caroline Valetkevitch and Alun John
Global Stock Performance
NEW YORK/LONDON, July 20 (Reuters) - A global stock index edged higher on Monday as chipmaker shares recovered some of their recent sharp losses, while oil prices were also slightly higher with investors cautious about developments in the Gulf.
Geopolitical Tensions in the Gulf
Yemen's Iran-aligned Houthis declared a naval blockade against Saudi Arabia. But Iran's Foreign Ministry said mediators had presented "proposals" to Tehran, signalling that diplomatic contacts remain active, but gave no details.
Oil Prices and Market Reaction
U.S. crude rose 0.15% to $82.61 a barrel and Brent rose to $88.63 per barrel, up 0.6% on the day. Higher oil prices have remained a worry for consumers and businesses since the February 28 start of the U.S.-Iran conflict.
Equity Market Movements
Equities mostly stabilized after last week's chip stock-led pullback.
Semiconductor Stocks Recovery
"We're seeing a bit of a turnaround in some of these semiconductor stocks that were under pressure," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. An index of semiconductors was last up 1.5% after ending Friday down more than 20% from its late June closing record high, a move that confirms it has been in a bear market.
"Another factor is oil prices have somewhat reversed."
Major Index Performance
The Dow Jones Industrial Average fell 158.80 points, or 0.30%, to 51,987.62, the S&P 500 rose 18.40 points, or 0.25%, to 7,476.09 and the Nasdaq Composite rose 141.45 points, or 0.55%, to 25,661.70.
Corporate Earnings and AI Impact
Upcoming Earnings Reports
U.S. second-quarter earnings season picks up pace, with several major companies, including Intel and IBM due to report results.
AI and Semiconductor Sector
The earnings will reinforce or challenge this year's gains, which have been driven by a surge in AI capital spending lifting semiconductor stocks and other companies that are seen as the beneficiaries of the buildout.
Secondary Effects of the War
The season will provide some insight into the AI-related trade, including for chipmakers, and also provide more color on secondary effects of the war.
Bond and Currency Markets
Treasury Yields and Rate Hike Expectations
U.S. Treasury yields rose as traders weighed escalating oil prices, driven by the widening war with Iran, and the impact on prices.
Futures markets are pricing in at least one Federal Reserve rate hike by year-end, and on Monday the benchmark 10-year Treasury yield was at 4.56%, up 2 basis points. [US/]
The yield on benchmark U.S. 10-year notes rose 6.28 basis points to 4.604%, from 4.541% late on Friday.
Currency Movements
The dollar rose as investors eyed developments in the Iran war as well, while the pound fell from earlier highs as markets prepared for new British Prime Minister Andy Burnham.
Sterling weakened 0.26% to $1.3418.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rose 0.15% to 100.98, with the euro down 0.25% at $1.141.
Commodities Update
Natural Gas Futures
U.S. natural gas futures eased about 1% on rising output, a decline in liquefied natural gas export flows, and forecasts for lower demand this week than previously expected.
(Reporting by Caroline Valetkevitch in New York and Alun John in London; additional reporting by Wayne Cole in Sydney; Editing by Sharon Singleton, Jan Harvey and Nick Zieminski)
