NEW YORK: Wall Street’s main stock indexes reversed early losses and gained in choppy trading on Tuesday, as investors took comfort from tumbling crude prices on expectations that the Middle East conflict could come to a sooner-than-expected end.
Crude and natural gas prices eased further from the worrying USD120-per-barrel mark, a day after President Donald Trump first said he saw an earlier end to the conflict than his previous timeline of four to five weeks.
However, investors were on the lookout for any signs of escalating tensions as US officials including Defense Secretary Pete Hegseth and top US general Dan Caine suggested that strikes against Iran were intensifying.
Iran also threatened to continue its oil blockade through the region. Energy producers in the Middle East are yet to resume full-scale production, and shipping costs are likely to be elevated for a while.
“Since yesterday we’ve seen some relief that potentially some of the worst-case scenarios may be avoided,” said Angelo Kourkafas, senior global investment strategist at Edward Jones.
“Of course, the impact from the conflict on inflation and growth will depend on the duration of the conflict. Trump’s comments yesterday eased some of the concerns about how long this may last. That said, it will likely continue to be a headline-driven market.”
Travel stocks, which have borne the brunt of the selloff since the war started, were lower on Tuesday, with an index tracking passenger airlines down about 1 percent, while cruise companies Carnival and Royal Caribbean also lost around 1 percent each.
Surging crude prices since the start of the conflict have revived concerns that the US economy could slip into stagflation and complicate the Federal Reserve’s work, as data also suggested the labor market was weakening.
Traders have priced in a potential 25 basis point rate cut around September, according to LSEG-compiled data.
At 11:34 a.m. ET, the Dow Jones Industrial Average rose 236.94 points, or 0.50 percent, to 47,977.74, the S&P 500 gained 23.20 points, or 0.33 percent, to 6,819.19 and the Nasdaq Composite gained 123.31 points, or 0.54 percent, to 22,819.26.
The CBOE’s volatility index, Wall Street’s fear gauge, dropped 2.65 points to 22.86, while the rate-sensitive small caps Russell 2000 gained 1 percent.
Eight of the 11 S&P 500 sectors edged higher led by technology stocks, while energy slipped 0.2 percent. Overall losses on Wall Street, since the start of the war, have been contained, aided by a rebound in the tech stocks, making them the best-performing sector on the S&P 500 this month with a 1.3 percent gain.
Advancing issues outnumbered decliners by a 2.2-to-1 ratio on the NYSE and by a 1.93-to-1 ratio on the Nasdaq.
The S&P 500 posted one new 52-week high and four new lows, while the Nasdaq Composite recorded 49 new highs and 67 new lows.