Stocks rose on growing speculation that a deal to end the war between the United States and Iran is getting closer, which has led operators to take greater risks after an extraordinary rise.
S&P 500 futures rose 0.8% after the index hit consecutive all-time highs. The index is heading for its third consecutive week of gains of more than 3%, a surprising rebound following growing signs that the United States and Iran are seeking to de-escalate their conflict, which has roiled energy markets. Optimism around artificial intelligence and strong business results have contributed to this momentum.
The price of Brent fell 4.4%, approaching US$95 a barrel, after President Donald Trump said Iran had made key concessions in negotiations with the United States. According to Axios, one of the points under discussion was for the United States to release $20 billion in frozen Iranian funds in exchange for Tehran giving up its reserves of enriched uranium.
The pre-market rally in US stocks intensified after a social media post attributed to the Foreign Minister of Iran affirmed that the passage of commercial ships through the Strait of Hormuz was open.
The dollar lost ground against the main currencies. Treasury yields fell, with the benchmark 10-year bond down eight basis points to 4.28%.
“Now that the situation in the Middle East appears to have stabilized, the market’s attention will once again focus on fundamentals, particularly earnings, given that the season has just started,” said Daniel Murray, deputy chief investment officer at EFG Asset Management. “Earnings expectations are optimistic, in line with strong underlying macroeconomic trends.”
Some Gulf Arab and European leaders said a peace deal between the United States and Iran could take about six months to finalize.
Brent crude oil fell to around $90 a barrel. Bank of England monetary policy committee member Sarah Breeden warned that the war could trigger several stresses in the markets simultaneously.
“As we approach May, the situation becomes serious,” said Andrea Gabellone, head of global equities at KBC Securities. “If a significant increase in stock market traffic is not observed by June at the latest, the situation will take a different turn.”
It took just 11 days for the S&P 500 to move from an oversold zone to an overbought zone on Thursday. This rebound has only been surpassed by that of 1982. The explanations for this abrupt change in trend point to a combination of dismantling of hedges, systematic purchases and closing of short positions by hedge funds in macroeconomic products.
While the Nasdaq’s 12-day bull run has propelled the index to new all-time highs, valuations of technology companies remain near their 10-year average. Earnings estimates have risen at the same pace as stocks, keeping forward price-to-earnings ratios at low levels.
“This realignment provides a more constructive entry point into equities, particularly in the quality large-cap growth segment,” said Scott Rubner, Chief Executive Officer. head of equity and equity derivatives strategy at Citadel Securities.
Netflix Inc. plummeted in pre-market trading in the US after disappointing forecasts. Alstom SA shares fell to their lowest level in more than two years in Paris after the manufacturer withdrew its financial forecasts for this fiscal year. An index of Asian stocks ended a three-day winning streak.
What Bloomberg Strategists Say
For now, it appears that bullish momentum is outweighing any concerns related to the weekend. Optimism for the truce remains widespread, and oil prices offer the right signals to fuel a further rally in financial assets. This epic rally has only brought cumulative profitability so far this year to fairly normal levels.
