Wall Street indexes advance with boost from chips, Iran optimism

NEW YORK: US stock indexes rallied on Thursday, with the Nasdaq’s 1.9% advance boosted by gains in semiconductor shares, while inflation fears eased after the US and Iran signed a peace agreement, although investors still priced in interest rate hikes this year from the Federal Reserve.

The Philadelphia semiconductor index sharply outperformed the rest of the market with a 6.4% rally as Intel’s shares jumped to a record high and finished up 10.6%. US President Donald Trump said iPhone maker Apple had agreed to work with Intel to design and manufacture its chips in the US.

Early in the session, oil prices had slid to their lowest levels since early March after the US and Iran signed an interim agreement that extends the April ceasefire by another 60 days to allow the sides time to reach a final deal. Inflation has been a huge worry for investors as oil prices had soared since the war began in late February.

Although Trump threatened to resume attacks if Iran failed to honour its commitments, the first ships started sailing through the Strait of Hormuz, where transportation of oil, gas, fertilizer and other cargoes had been disrupted since the start of the war.

On Wednesday, all three of Wall Street’s major indexes tumbled, with investors pricing in the likelihood of Fed rate hikes after the central bank’s new Chair Kevin Warsh underscored the need to curb inflation and other policymakers signaled higher borrowing costs ahead.

“Markets got spooked by Warsh yesterday essentially promising to contain inflation,” said Tony Welch, chief investment officer at SignatureFD, but he pointed to easing oil prices and recent strength in earnings and economic data. “All together, the package of data is still supportive whether or not the Fed has become a little bit more hawkish.”

Traders were betting on a roughly 50% chance of a 25-basis-point rate hike as soon as September and a roughly 20% probability for a 50-basis-point hike, according to CME Group’s FedWatch tool.

Investors were still assessing Warsh’s indication that the Fed would provide less guidance on future policy moves and his stated focus on price stability. Eric Johnston, chief equity and macro strategist at Cantor, said, “The conclusion today is that the Fed has more credibility around inflation.”

The Dow Jones Industrial Average rose 72.15 points, or 0.14%, to 51,564.70, the S&P 500 gained 80.48 points, or 1.08%, to 7,500.58 and the Nasdaq Composite gained 496.28 points, or 1.91%, to 26,517.93.

With the market due to be closed on Friday for the Juneteenth holiday marking the emancipation of enslaved Black Americans, the S&P 500 marked a 0.93% weekly gain compared with the Nasdaq’s 2.43% advance and the Dow’s 0.71% increase.

On the day, five out of 11 major S&P 500 industry sectors finished higher. Technology led gains with a 2.7% advance, followed by consumer discretionary, which closed up 1.8%.

Consumer stocks were boosted by the travel segment as the prospect of lower fuel prices supported rallies in cruise-line companies and airline stocks. The Dow Jones Transport average index finished up 0.5%.

The small-cap Russell 2000 index rose 2% and marked a record closing high.

On the data front, labour department data showed the number of Americans filing claims for unemployment benefits fell last week as layoffs remained low.

The S&P 500 software and services sector finished down 0.7% after falling to the lowest in more than two months. The sector came under pressure as shares of Accenture tumbled 18%after the company trimmed the top end of its annual revenue forecast. Peers including Cognizant Technology Solutions, Gartner and IBM fell between 4.5% and 10.5%.

Among other movers, Kroger shares fell 8.4% after the grocer reported a lower-than-expected profit for the first quarter and kept its annual forecasts unchanged.

Shares in Elon Musk’s SpaceX lost 3.6% in their second straight day of declines, after the space and AI company had rallied sharply for the first few days of trading after its market debut last Friday.

Thursday also marked the once-in-a-quarter simultaneous expiry of derivatives contracts tied to stocks, index options and futures, also known as “triple witching”, which can boost trading volume and aggravate volatility.

On US exchanges 33.59 billion shares changed hands compared with the 21.83 billion average for the last 20 sessions.

Advancing issues outnumbered decliners by a 1.72-to-1 ratio on the NYSE, where there were 286 new highs and 183 new lows.

On the Nasdaq, 3,136 stocks rose and 1,773 fell as advancing issues outnumbered decliners by a 1.77-to-1 ratio.

The S&P 500 posted 29 new 52-week highs and 27 new lows while the Nasdaq Composite recorded 123 new highs and 152 new lows.