Wall Street sank on Iran war fears. Now it’s surging. Here’s why
By John Towfighi, CNN
New York (CNN) — US stocks have been on a two-week rally that has helped the S&P 500 and Nasdaq erase all losses tied to the outbreak of the war with Iran.
The S&P 500 has risen nine out of the past 10 trading sessions, gaining 10% across that period and putting the index up more than 1% since the US-Israeli war with Iran began at the end of February.
The S&P on Wednesday was set to a close at a fresh record high, surpassing its last record set in January. It’s a stark shift from just a few weeks ago, when the index was down roughly 9% since its January peak.
What’s changed? Investors have leaned in to optimism about the US-Iran ceasefire, albeit fragile. A pullback in oil prices – though still elevated compared to pre-war levels – has also helped fuel a stock market rally. Wall Street is also in the midst of earnings season, and investors are enthusiastic about forecasts for corporate profits.
“It has been yet another V-shaped buy-the-dip recovery in the S&P 500,” Ed Yardeni, a Wall Street veteran and president of Yardeni Research, wrote in a note.
Since dipping into a correction in late March, the Nasdaq has soared more than 10%, putting it less than 1% away from its record high set in late October.
Stocks were mixed Wednesday: The Dow fell 125 points, or 0.26%. The S&P 500 rose 0.35%. The Nasdaq gained 0.8%, rising for the 11th trading session in a row.
Traders have piled in to stocks on any hint that the war might be coming to an end. The Dow last week had its best day in a year and is up roughly 5% this month, rebounding after closing in correction in late March. The Dow is down 1% since the war with Iran began.
But “a healthy skepticism is warranted,” Craig Johnson, chief market technician at Piper Sandler, wrote in a note.
The rally in stocks “appears to be built on hope,” Johnson said, with oil prices still trading above $90 per barrel and uncertainty about the duration of the war remaining.
The rebound in stocks means 401(k) plans, individual retirement accounts and personal portfolios invested in funds that track the S&P 500 or other US stock benchmarks are recovering after a rocky few weeks.
While stocks have recouped losses, US gas and diesel prices remain elevated, straining Americans’ budgets. The enthusiasm in the stock market might not reflect people’s everyday experience in the economy.
Stocks have pushed higher this week despite the lack of an agreement during US-Iran talks in Islamabad on Saturday and President Donald Trump announcing a blockade of the Strait of Hormuz.
“The recent ceasefire between the US and Iran sparked a relief rally,” analysts at Citi wrote in a note. “However, uncertainty remains unusually elevated, especially following the US’ announced blockade of the Strait of Hormuz.”
This is a developing story and will be updated.
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