United States major benchmark averages rebounded on Wednesday (Thursday AEST) as easing oil prices and lower Treasury yields lifted investor sentiment amid growing optimism that tensions in the Middle East could soon de-escalate.
The Dow Jones Industrial Average climbed 645.5 points, or 1.3%, to close at 50,009.4, while the S&P 500 advanced 79.4 points, or 1.1%, to 7,433.0. The Nasdaq Composite outperformed, gaining 399.7 points, or 1.6%, to finish at 26,270.4.
Energy markets retreated sharply after United States President Donald Trump said negotiations with Iran were in their “final stages”, fuelling hopes for a resolution to the regional conflict that has rattled markets and driven crude prices higher in recent weeks.
West Texas Intermediate crude futures fell 5.7% to settle at US$98.26 per barrel, while Brent crude declined 5.6% to close at $105.02 a barrel.
The pullback in oil prices helped ease concerns over inflation and prompted a retreat in Treasury yields. The 30-year Treasury yield fell 1.2% to 5.122%, while the benchmark 10-year yield eased 1.8% to 4.585%.
Bond markets had unsettled investors in recent sessions after long-dated Treasury yields climbed to multi-year highs, with the 30-year yield reaching its highest level since 2007.
Investors have become increasingly concerned that rising oil prices could reignite inflationary pressures and force the Federal Reserve to tighten monetary policy further.
Concerns have also mounted that the Fed, which is expected to soon be led by Kevin Warsh, may be lagging in its response to persistent inflation, with higher borrowing costs threatening to further weigh on economic growth already strained by elevated energy prices.
Minutes from the Federal Reserve’s latest policy meeting reinforced those concerns, showing policymakers remained open to additional interest rate increases if inflation pressures intensified due to ongoing geopolitical tensions.
“A majority of participants highlighted, however, that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2 percent,” the minutes stated.
Market expectations for further tightening fluctuated following the release of the minutes. According to the CME Group FedWatch Tool, traders are now pricing a 40.2% probability of a 25 basis point rate hike in December, and an 11.4% chance of a 50 basis point hike.
Investor attention also centred on chipmaker Nvidia ahead of its closely watched first-quarter earnings report, seen as a major gauge of continued momentum in the artificial intelligence sector.
Nvidia shares rose 1.3% during regular trading before slipping 1.2% in after-hours trade, despite the company forecasting second-quarter revenue above market expectations and unveiling an $80 billion share buyback program.
Meanwhile, shares in financial software company Intuit fell 3.9% after Reuters reported that the company planned to cut around 3,000 jobs, citing an internal memo.
