Wall Street Hits Record as Iran De-escalation Sends Oil Lower

U.S. stocks kicked off August with a rally, sending the Dow Jones Industrial Average to a record close as signs of de-escalating U.S.-Iran tensions pulled oil prices lower and pushed Treasury yields down. The S&P 500 jumped 1.5% to 7,600.50, finishing just 0.1% below its record set earlier this summer, according to an Associated Press report. The Nasdaq Composite surged 2.13% to 25,913.90.

The Dow rose 693.38 points, or 1.32%, to close at 53,178.41 — a new high. The gains came after Trump said on Sunday that talks with Iran to reopen the Strait of Hormuz would take place Monday, though Iran disputed that talks were planned. Trump also said he had called off planned military strikes on Iran, according to multiple reports. Analysts at NDTV Profit and Fortune noted that his remarks marked a sharp shift from earlier signals that Washington was preparing fresh strikes.

Crude oil prices fell sharply in response. Brent crude settled at about $83 per barrel, down roughly 5% from Friday’s close, according to reports from the Times of India, NDTV Profit, and Fortune. West Texas Intermediate dropped nearly 7% to $78.93 per barrel, NDTV added. The Times of India reported that Brent had fluctuated between $72 and $102 a barrel in July as sentiment shifted over the prospects of tanker traffic through the Persian Gulf.

The decline in oil prices helped push U.S. Treasury yields lower. The yield on the benchmark 10-year note fell to around 4.67%–4.68%, down from 4.75% at Friday’s close, according to sources from NDTV Profit and the Times of India. The lower yields eased concerns that higher energy costs would reignite inflation.

Communication services was the best-performing S&P 500 sector, climbing 4.3% on the back of gains from Meta Platforms and Alphabet, according to a report from the Star-Advertiser (via Reuters). Energy was the worst sector, dropping 1.2%. Shares of companies with heavy fuel expenses rose: United Airlines gained 5.6%, American Airlines advanced 5.7%, and Norwegian Cruise Line Holdings rose 5.4%, the Times of India reported. Amazon shares advanced 4.6% as its market capitalization surpassed $3 trillion for the first time after its earnings results last week, the Star-Advertiser noted.

Semiconductor stocks remained under pressure. Micron Technology fell 4.9% and Advanced Micro Devices declined 2.7%, according to the Times of India, which noted that investors continued to question whether the rapid revenue growth fueled by artificial intelligence can be sustained. Other AI-related companies scheduled to report this week include SpaceX, which jumped 5.6% ahead of its first quarterly results since going public, as well as Advanced Micro Devices and data storage firms SanDisk and Western Digital, the Star-Advertiser reported.

“Every day, everybody wakes up and looks at the price of a barrel of oil and the yield on the 10-year, and if that’s going lower, the market’s OK, and if it’s going higher, the market’s not good whatsoever,” said Art Hogan, chief market strategist at B. Riley Wealth in Boston, as quoted by the Star-Advertiser.

Earnings have been strong this quarter, showing a 29.3% growth rate from the 304 S&P 500 companies that have reported through Friday, with 85.2% topping analyst expectations, according to LSEG data cited by the Star-Advertiser. Bristol Myers Squibb shares edged up 0.2% after a report of preliminary merger talks with AstraZeneca, while Marriott International slumped 7% after forecasting third-quarter profit below expectations.

Markets are pricing in about a 65% chance of a rate hike of at least 25 basis points at the Federal Reserve’s September meeting, according to the CME FedWatch tool, as reported by both the Star-Advertiser and Fortune. “It seems the only way the Fed can avoid hiking in September is if the U.S. data is poor enough,” ING’s Chris Turner said in an email, as quoted by Fortune. “A major input to that decision comes this week in the form of U.S. jobs data, including JOLTS job openings, ADP [private payrolls], and Friday's non-farm payrolls report.” The consensus expectation for new jobs is around 75,000 to 80,000, Fortune added.

Asian markets were mixed. South Korea’s Kospi index dropped 5.1%, following Friday’s record-breaking 17.9% rally, the Times of India reported. Fortune noted a similar decline of 5.12%. Japan’s Nikkei 225 slipped 0.9% after the United States and Japan confirmed coordinated action to support the yen, the Times of India added.

Advancing issues outnumbered decliners by a 2.62-to-1 ratio on the NYSE and by a 3.01-to-1 ratio on the Nasdaq. The S&P 500 posted 15 new 52-week highs and one new low, while the Nasdaq recorded 121 new highs and 96 new lows. Volume on U.S. exchanges was 19.36 billion shares, compared with the 17.66 billion average over the last 20 trading days, according to the Star-Advertiser.