US stocks: US market rallies, Dow ends with record on US-Iran deal, oil price slide

Wall Street’s main indexes rallied on Monday, with the Dow marking a record-high close after the United States and Iran struck a preliminary agreement to end the Middle East war and reopen the Strait of Hormuz, leading to an easing of inflation fears as crude oil prices dropped.

The deal framework – expected to be formally signed in Switzerland on Friday – did not address key ‌issues such as Tehran’s ⁠nuclear program ⁠and the Israel-Lebanon conflict.

Still U.S. crude futures settled down 4.9% following the news and hit their lowest level since March, aiding shares of energy-sensitive airline and cruise stocks and hurting energy shares.

Rate-sensitive technology stocks rallied as investors were more comfortable taking on riskier bets with lower oil prices easing inflation fears.

“Markets are higher on a classic relief rally. We have a US-Iran deal that’s driving oil sharply lower. This is easing inflation fears and basically pushing investors back into risk assets like technology,” said Gene Goldman, chief investment officer at Cetera Investment Management, in El Segundo, California.

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The three main indexes marked their third consecutive session of gains, recovering after Middle East tensions and a pullback in AI-related ⁠stocks had ‌put Wall Street’s record climb on pause more than a week ago. According to preliminary data, the S&P 500 gained 123.80 points, or 1.67%, to end at 7,555.26 points, while the Nasdaq Composite gained 797.79 points, or 3.07%, to 26,686.64. The ⁠Dow Jones Industrial Average rose 490.38 points, or 0.96%, to 51,684.88.

One hope among investors is that a resumption of oil flows from the Middle East and easing crude prices could give the U.S. Federal Reserve, which is grappling with inflation, room to hold interest rates steady instead of raising borrowing costs.

Along with the Iran deal, another big focus for the week is the U.S. central bank’s next policy update, which is due on Wednesday, after Chair Kevin Warsh’s first policy meeting since he took over from Jerome Powell last month. The meeting follows May inflation data that showed higher energy costs filtering into consumer prices. Traders expect the Federal Reserve to leave interest rates unchanged this week, but are pricing in a ‌42% probability for a 25-basis-point hike by the end of the year, according to CME Group’s FedWatch tool.

In individual stocks, SpaceX’s shares rallied sharply for their second day of trading after the Elon Musk-led firm’s blockbuster IPO pushed its valuation above $2 trillion.

Investors had been relieved by its strong ⁠market debut on Friday as they hoped that its landmark Nasdaq launch boded well for the broader market and for the highly anticipated OpenAI and Anthropic IPOs expected later this year.

Elsewhere, airlines were among the leading transport sector gainers with United Airlines rallying. Among cruise companies, Norwegian Cruise and Carnival Corp also climbed.

The CBOE Volatility Index, Wall Street’s fear gauge, slipped for its third day in a row after rising to a more than two-month high the previous week. The Philadelphia SE Semiconductor index rose sharply with a big boost from chip giant Nvidia and Micron, which rallied after at least two brokerages sharply raised their price targets for the stock. In other movers, shares in Fox tumbled after the company said it would buy Roku in a $22 billion deal. Roku shares also fell.