– Wall Street kicked off the holiday-shortened week with stocks joining bonds higher as hopes for a peace deal between the US and Iran overshadowed military strikes in the Persian Gulf.
Most Read from Bloomberg Expectations of an agreement drove the S&P 500 toward a record, with chipmakers leading the charge
Treasury yields fell as concerns over a flare-up in inflation eased, making traders pare back their wagers on near-term Federal Reserve rate hikes. Oil continued to whipsaw on Middle East developments, with Brent topping $100 after slumping more than 7% on Monday. US and Iranian forces clashed near the Strait of Hormuz overnight, highlighting the tension between the two sides even as they tout progress toward an interim peace deal.
The exchange of strikes came hours after US President Donald Trump said negotiations with Tehran to extend their ceasefire and reopen the strait are proceeding, though Secretary of State Marco Rubio added Tuesday that a deal would likely take a few days to finalize. “Doubts about the deal and its detail, especially relating to uranium enrichment and the tolling of the Strait of Hormuz, persist,” said Kyle Rodda at Capital.com. “However, market participants are placing their bets on peace and subsequently buying into very strong equity fundamentals.” “While we’d like to share the optimism, there have been enough setbacks in the process of crafting an agreement between Washington and Tehran that we’ll remain cautious until there is more tangible progress,” said Ian Lyngen at BMO Capital Markets. Just because a ceasefire isn’t an immediate catalyst, it will still be a steady positive influence on stocks and bonds as long as growths stays solid and inflation doesn’t spike, according to Tom Essaye at The Sevens Report. “Don’t expect an agreement to immediately send the S&P 500 running to 8,000, but while the near-term reaction may be a mild disappointment, the reality is that removing distractions and allowing investors to…