Wall Street rises, oil falls, in hope of a resumption of negotiations between the United States

Wall Street stock indices have extended their gains, oil prices have fallen, and the appeal of the dollar as a safe haven has diminished on Tuesday, as the United States indicated that new peace talks with Iran could be imminent, even though the blockade on Iranian ports remains in place.

US President Donald Trump said that talks could resume in Pakistan over the next two days, after being interrupted over the weekend. Pakistani and Iranian officials also stated that negotiations could restart, with the agenda including transit through the Strait of Hormuz, Iran’s nuclear activities, and international sanctions.

The Dow Jones Industrial Average .DJI rose 0.63% to 48,522.30, the S&P 500 .SPX gained 1.11% to 6,962.85, and the Nasdaq Composite .IXIC strengthened by 1.84% to 23,611.10.

“The shift from conflict between the US and Iran from missiles to words leaves markets hopeful for an end to war,” said Bob Savage, BNY’s market’s chief macro strategist.

The gains of major tech companies helped push the S&P 500 .SPX back to pre-war levels. The STOXX 600 .STOXX index in Europe regained ground, rising 0.99% for the day, but remaining below its February 27th closing level, the day before US and Israeli strikes on Iran.

On a cautionary note, Saxo’s chief investment strategist Charu Chanana stated, “Markets are changing their hopes, not resolutions.” The International Monetary Fund has revised down its global growth forecasts.

A series of financial company results were recorded, including BlackRock’s asset manager BLK.N, which announced a first-quarter profit increase, causing its stock to rise by 3.5% and offset some losses since the beginning of the year.

Citigroup C.N beat first-quarter profit estimates, with its stock rising over 3%. JPMorgan JPM.N also exceeded expectations, but its stock fell by 0.6%.

Dollar Retreat

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, fell towards its late February levels, dropping 0.26% on Tuesday to 98.09.

The dollar’s safe-haven status had boosted the currency since the start of hostilities. It dropped to 97.978 at the session’s beginning, its lowest level since the war began.

US Labor Department inflation data weighed on the dollar, with the Producer Price Index (PPI) for final demand showing a 0.5% increase last month, below the 1.1% rise expected by Reuters economists.

Oil Decline

Oil prices declined, with expectations of new dialogue to end the war outweighing concerns about supply disruptions. Brent LCOc1 fell to $95.02 per barrel, down 4.37% for the day, while US crude CLc1 lost 7.27% to trade at $91.88 per barrel. Both benchmarks were above $100 per barrel the previous day when the US began blocking Iranian ports, angering Tehran and adding uncertainty to flows through the Strait of Hormuz.

A Bank of America survey of international fund managers in early April showed investors expected oil prices to reach $84 per barrel by year-end.

Inflation Fears Support Treasury Yields

US Treasury yields fell, with the two-year yield US2YT=RR dropping 2.6 basis points to 3.755% and the benchmark 10-year yield US10YT=RR declining by 3.7 basis points to 4.26%.

Two-year Treasury bond yields, which generally move based on rate cut expectations from the Federal Reserve, are still about 40 basis points above late February levels, with energy price hikes fueling inflation fears. This has prompted investors to prepare for the possibility that major central banks will reconsider their rate cut or pause forecasts this year, moving towards hikes instead.