Stocks pull back, oil choppy as US-Iran peace deal remains in flux
Market Reactions to US-Iran Peace Negotiations
By Lawrence Delevingne and Sophie Kiderlin
May 7 (Reuters) - U.S. and European stocks slipped on Thursday, as oil prices swung between gains and losses in volatile trading with investors still uncertain about peace negotiations between the U.S. and Iran.
Wall Street and Global Index Performance
On Wall Street, major stock indexes pulled back slightly a day after strong chipmaker earnings pushed them to multiple records. The S&P 500 fell 0.4%, the Nasdaq Composite dipped 0.1% and the Dow Jones Industrial Average lost 0.6%.
Oil Prices and Geopolitical Developments
Oil prices ultimately settled lower after a report said Saudi Arabia and Kuwait lifted restrictions on U.S. use of their airspace and military bases, allowing Washington to restart operations to escort commercial ships through the Strait of Hormuz as early as this week.
Brent crude futures <LCOc1> settled down 1.2% or $1.21 at $100.06 a barrel, while U.S. West Texas Intermediate crude <CLc1> futures settled down 0.28% or 27 cents at $94.81. Both benchmarks had earlier declined by as much as $5 a barrel on optimism that Washington and Tehran were moving toward a limited, temporary agreement to halt their conflict.
European and Asian Markets
Europe's STOXX 600 finished 1.1% lower, having jumped 2.2% on Wednesday, while MSCI's broadest index of Asia-Pacific shares outside Japan hit a fresh all-time high, up 1.6%. Japan's Nikkei crossed 62,000 for the first time.
MSCI's All-Country World Index ticked down 0.1%, holding around record highs.
Oil Volatility and Economic Impact
OIL RISK
"Oil volatility may be having less of an effect on the stock market’s day-to-day performance, but its longer-term impact on inflation is still an open question," Daniel Skelly, head of Morgan Stanley's Wealth Management Market Research & Strategy Team, wrote in a note on Thursday.
Energy Prices and Treasury Yields
Brent is still around 40% above its late-February level, when the war began, while 10-year Treasury yields have surged - a reminder of the strain higher energy costs continue to put on the global economy. Ten-year U.S. Treasury yields rose by 2.8 basis points to 4.382%.
"Certainly the clock is ticking towards a point ... when the pace at which oil inventory drawdowns at the current pace become unsustainable and energy prices jump materially," Investec market strategists wrote in a note on Thursday.
Rocketing oil prices whacked global markets in March but a fragile ceasefire and prospect of a deal have spurred a risk-on rally since April that has been fueled by strong tech earnings reports.
Corporate Earnings and Currency Markets
S&P COMPANIES SET FOR ROBUST PROFIT GROWTH
S&P 500 companies are on track for their strongest profit growth in more than four years, although Intel <INTC.O> and Advanced Micro Devices <AMD.O> declined on Thursday, paring gains from earlier this week.
"U.S. earnings confirm a broad-based profit boom - record EPS (earnings per share) beats, all-time-high margins and sharply upgraded '26 growth expectations," Manish Kabra, a market strategist with Societe Generale, wrote in a client note on Thursday.
Upcoming Economic Data
Investors await the U.S. non-farm payrolls report on Friday, with jobs expected to have increased in April by 62,000 after rebounding 178,000 in March, a Reuters survey of economists shows.
Currency Market Movements
In currency markets, the euro was little changed at $1.174. The dollar index, which measures the U.S. currency against six units, was also flat.
The yen remained in the spotlight after spikes in recent sessions prompted market speculation that Japan had intervened to support the long-battered currency.
The yen ticked down 0.24% at 156.76 per dollar, having hit a 10-week high of 155 on Wednesday.
(Reporting by Lawrence Delevingne in Boston, Sophie Kiderlin in London and Ankur Banerjee in Singapore; Editing by Elaine Hardcastle, Nick Zieminski, Susan Fenton, Will Dunham, Nia Williams and David Gregorio)
