US Stocks Resume Gains, Close to Erasing Iran War-Driven Losses

Traders work on the floor of the New York Stock Exchange. Photo by Michael Nagle /Bloomberg

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(Bloomberg) — US equities rose for the eighth time in nine sessions as investors assessed the US Naval blockade of the Strait of Hormuz that took effect Monday and parsed through earnings announcements at home. 

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Speaking at the White House, President Donald Trump said Iran wants “to make a deal” with the US. The remarks come after the negotiations between the countries failed over the weekend, pushing up oil prices and inflation expectations.

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Trump’s comments sent the S&P 500 Index up 0.4% as of 1:12 p.m. in New York, with seven of the 11 industry groups advancing. The 500-member gauge is within 0.5% from erasing all of its losses since the start of the Iran war.

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Goldman Sachs Group Inc. was among the index’s worst performers, slipping 1.9% after better-than-expected equity trading revenue failed to offset a miss in fixed-income, currency and commodities trading, marking rough start to earnings season.  

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The Nasdaq 100 Index rose 0.5% in its ninth consecutive day of gains, while the Dow Jones Industrial Average traded flat. The Cboe Volatility Index hovered near 19.70. 

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“Investors are clearly exhausted by the conflict, and you can see it in how little the market reacts to bad news,” said Mark Hackett, chief markets strategist for Nationwide. “The focus is starting to shift back to fundamentals, where earnings remain supportive, and with institutions already on the sidelines, there’s simply less left to sell.”

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First-quarter earnings season kicked off with a mixed start. Goldman’s earnings miss Monday morning offered traders one of the first looks at the financial health of corporate America. Wall Street’s biggest banks are expected to report a record $18 billion stock-trading haul during the first quarter as the war and the software scare fueled more activity from investors. JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. are all due to report earnings Tuesday morning.

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Stocks advanced for much of last week on hopes that the peace talks in Pakistan would help bring about an end to the US-Israeli war against Iran. 

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As oil prices pushed back toward near $100 a barrel, the move sent energy and fertilizer stocks higher, while airlines dropped.

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Trump has made a “high stakes gamble aimed at forcing Iran to bow to his demands,” said Wealth Club strategist Susannah Streeter. 

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But Trump’s record of pulling back from the brink leaves markets hopeful an agreement can be salvaged, she said. The blockade may also be designed to pressure Beijing — which buys oil from Iran — into playing a more active role in reopening the Strait, according to Capital Economics.

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Morgan Stanley’s Mike Wilson wrote Monday that while the S&P 500 may experience renewed weakness and fall to the 6,300 to 6,500 level, it may be a buying opportunity. He said countries would find ways to solve the impasse at the Hormuz, which is “intolerable for the global economy.”

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Yet there is some skepticism of the buy-the-drip approach. Retail traders, who had been some of the most consistent buyers of stocks in recent months, have become net sellers of exchange traded funds and JPMorgan strategists say positioning by the group shows skepticism on last week’s rally.