Stocks mostly ease with tech shares while oil prices climb to two-week high
Market Overview and Key Drivers
By Caroline Valetkevitch and Samuel Indyk
NEW YORK/LONDON, May 18 (Reuters) - Major stock indexes mostly eased as technology shares fell on Monday, while Brent oil prices climbed to a two-week high as investors assessed whether there will likely be progress soon to end the Iran war.
Longer-dated U.S. Treasury yields were nearly flat after climbing to their highest level in over a year in overnight trading.
Impact of Iran War on Markets
Sovereign bond yields have risen sharply recently as investors worry the war in Iran that began in late February may bring a lasting inflationary shock. Energy costs, they fear, will feed through to consumer price inflation and lead to a U.S. Federal Reserve rate hike.
U.S. President Donald Trump said on Monday he had paused a planned attack against Iran to allow for negotiations to take place on a deal to end the war, after Iran sent a new peace proposal to Washington.
Oil Prices React to Geopolitical Tensions
Oil prices rose as investors digested the latest developments. U.S. crude added $3.24 to settle at $108.66 a barrel. Brent crude gained $2.84 to $112.10 - its highest close since May 4.
Stock Market Sector Performance
Profit-Taking in Tech Shares
PROFIT-TAKING IN TECH SHARES
Market watchers said investors may be taking profits in tech shares, which have had a strong run recently. Also, they are bracing for quarterly results from Nvidia on Wednesday.
Technology, down 1%, led sector declines in the S&P 500, while an index of semiconductors was down 2.5%. Energy led sector gainers and was last up 1.8%.
"The semiconductors particularly got beaten up a little, and they've had a huge, huge run," said Bruce Zaro, managing director at Granite Wealth Management in Plymouth, Massachusetts.
The recent rise in interest rates adds to investors' worries, he said, noting that "there is this assumption that rising interest rates are bad for technology stocks. I would debate that in many ways."
Global Political Developments
In addition, strategists noted that Trump's first visit to Beijing since 2017 ended on Friday with no major breakthroughs on trade or tangible help from Beijing to end the U.S.-Israeli war with Iran.
Major Index Movements
The Dow Jones Industrial Average rose 159.95 points, or 0.32%, to 49,686.12, the S&P 500 fell 5.45 points, or 0.07%, to 7,403.05 and the Nasdaq Composite fell 134.41 points, or 0.51%, to 26,090.73.
MSCI's gauge of stocks across the globe fell 0.77 points, or 0.07%, to 1,098.23.
The pan-European STOXX 600 index rose 0.54%.
Bond Yields and Economic Implications
Rising yields push up borrowing costs and mean a higher discount for future company earnings, challenging stock valuations.
The yield on the benchmark 10-year Treasury note climbed to 4.659% in overnight trading, its highest level since February 2025. It has since retraced its gains and was last nearly flat on the day at 4.591%.
International Bond Markets
Earlier, Japan's 10-year yield hit a peak not seen since 1996 as the government proposed to issue fresh debt to fund a planned extra budget to cushion the economic blow from the Iran war. Germany's 10-year bond yield rose to a level not seen in 15 years.
AI and Retail Earnings in Focus
AI, RETAIL EARNINGS TO TEST STOCKS' RECENT RALLY
Nvidia and Semiconductor Sector
The artificial intelligence trade will be tested by earnings results from Nvidia due on Wednesday, with expectations high for the world's most valuable company.
Nvidia shares ended the day 1.3% lower. They are, however, up sharply since a March low, while the Philadelphia SE semiconductor index has also surged amid demand for chips as tech companies spend massively to build AI-related infrastructure.
Legal and Retail Sector Updates
A U.S. jury on Monday ruled against Elon Musk in his lawsuit against OpenAI, finding the AI company not liable to the world's richest person for having allegedly strayed from its original mission to benefit humanity.
Also due this week are results from a host of retailers, including Walmart, which will provide insight into how consumers are faring with high energy prices.
Currency and Commodity Markets
The dollar slipped against most major currencies as U.S. Treasury yields were off recent high levels.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.33% to 99.03.
Spot gold rose 0.61% to $4,565.54 an ounce.
(Reporting by Caroline Valetkevitch in New York and Samuel Indyk in London; additional reporting by Wayne Cole; Editing by Sharon Singleton, Nick Zieminski, Deepa Babington, Rod Nickel)
