The S&P 500 Index ($SPX) closed up +0.02% on Wednesday, while the Dow Jones Industrial Average ($DOWI) gained +0.36% and the Nasdaq 100 Index ($IUXX) slipped -0.09%.
The Dow Jones Industrials posted a new record high during the session, while the Nasdaq 100 fell back from its own all-time high reached earlier in the day.
Enthusiasm for artificial intelligence, lower oil prices, and easing bond yields provided broad support for equities throughout Wednesday’s trading session.
Crude oil prices fell more than -5% amid optimism that oil flows from the Middle East would normalize soon, driven by expectations surrounding a US-Iran peace deal.
The decline in crude prices eased inflation expectations and pushed the 10-year T-note yield down to a 1.5-week low of 4.45% on Wednesday.
However, comments from President Trump weighed on stocks after he said he was “not satisfied” in negotiations with Iran, dampening expectations for an imminent end to the conflict.
Crude oil initially tumbled to a 5-week low after Iranian state television said it obtained an unofficial draft of a US-Iran memorandum, which described a naval blockade lift and restored commercial transit through the Strait of Hormuz.
Secretary of State Rubio added that “an interim agreement is only a couple of days away,” but crude prices bounced from session lows after US officials called the draft obtained by Iranian state television a “complete fabrication” and “not true.”
The International Energy Agency said in a recently released monthly report that global oil inventories declined at a rate of about 4 million bpd in March and April, and the market will remain “severely undersupplied” until October even if the conflict ends next month.
Goldman Sachs estimates that the current disruption has drawn down nearly 500 million bbl from global crude stockpiles, with the drawdown potentially reaching 1 billion bbl by June.
Airlines and cruise operators rallied sharply on the oil price decline, with United Airlines Holdings (UAL) and Norwegian Cruise Line Holdings (NCLH) each closing up more than +6%, and Carnival (CCL) rising more than +4%.
Energy producers moved in the opposite direction, with Baker Hughes (BKR) closing down more than -5% and Halliburton (HAL) falling more than -3% as lower crude prices pressured sector earnings outlooks.
Zscaler (ZS) led cybersecurity stocks sharply lower, closing down more than -31% after forecasting Q4 revenue of $875 million to $878 million, below the consensus estimate of $879.1 million.
AppLovin (APP) closed up more than +10% to lead gainers in both the S&P 500 and Nasdaq 100 after Morgan Stanley laid out a bullish case for the stock based on rising conversion rates.
Verra Mobility (VRRM) collapsed more than -70% after cutting its full-year adjusted EPS estimate and disclosing that Avis Budget had terminated its contract with the company.
JPMorgan Chase (JPM) closed down more than -2% to lead Dow losers after CEO Dimon said the company will spend about $1 billion more this year than executives expected last month.
As of Wednesday, 83% of the 475 S&P 500 companies that reported Q1 earnings have beaten estimates, with Q1 S&P 500 earnings projected to climb +12% year-over-year according to Bloomberg Intelligence.
The markets are currently discounting just a 3% chance of a -25 bp rate cut at the next FOMC meeting scheduled for June 16-17.
ECB Governing Council member Yannis Stournaras said, “The likeliest outcome is an ECB interest rate hike in June,” citing the prolonged conflict in the Middle East and sustained energy price pressure.
Overseas markets were mixed, with Japan’s Nikkei Stock Average rallying to a new record high, China’s Shanghai Composite falling -1.25%, and the Euro Stoxx 50 edging up +0.11%.
