Stan Choe
Oil prices are rising as the war with Iran threatens to drag on for a long time, but the US stock market is nevertheless headed for a new record.
Brent crude rose 2.7 percent to $104.02 a barrel after President Donald Trump said the U.S.-Iran ceasefire was “life support” after rejecting Iran’s latest proposal to end their war. The rejection raises the stakes for Trump’s trip this week to China, where he could ask President Xi Jinping to press Iran for a deal. Xi is powerful because China is the largest buyer of Iranian-approved crude oil.
The war has already sent the price of a barrel of Brent from around US$70 and sent an explosion of inflation through the world economy. That’s because it has closed the Strait of Hormuz and kept oil tankers stuck in the Persian Gulf instead of delivering crude to customers around the world.
Still, the US stock market has been setting recent records on hopes that the war won’t keep oil prices high for too long. U.S. companies are currently generating higher profits than analysts had expected, while signs show the U.S. economy is holding up even as households feel frustrated by high gasoline and tax bills.
On Wall Street, the S&P 500 rose 0.3 percent from its record high. The Dow Jones was up 107 points, or 0.2 percent, and the Nasdaq composite was 0.3 percent higher and on track to set an all-time high. The Australian share market is expected to rise, closing at 4.59am AEST pointing to a gain of 18 points, or 0.2 per cent, at the open. Part of the ASX lost 0.5 percent on Monday. The Australian dollar was trading at US72.50¢.
Mosaic helped drag down the market after the fertilizer company reported weaker-than-expected results for the latest quarter. The company benefits from higher commodity prices, but also contends with higher prices for sulfur and other raw materials because of supply gluts triggered by the war with Iran.
Mosaic shares fell 1.5 percent, and more stocks within the S&P 500 fell than rose.
Shares of companies whose customers have the least cushion to absorb higher gasoline prices struggled, with Dollar General falling 6.8 percent. Businesses with larger fuel bills also suffered the biggest losses in the market, including a 4.4 percent drop for Carnival and a 3.2 percent drop for Southwest Airlines.
Helping offset that was Fox, which rose 4.8 percent after reporting stronger profits and revenue for the latest quarter than analysts had expected.
More than four out of every five companies in the S&P 500 index that have reported their results for the latest quarter so far have raised profit expectations, and are on track to deliver overall growth of nearly 28 percent, according to FactSet. If it does, it will be the best growth since the end of 2021.
Aside from earnings reports, Beazer Homes USA rose 34.8 percent after Dream Finders Homes offered to buy it in a deal worth about $704 million. The combination would create the seventh-largest homebuilder in the country, and Dream Finders is asking Beazer’s shareholders to push its management and board to OK the deal after conducting several tests of its own.
Dream Finders added 1.5 percent.
Technology stocks were also strong, continuing their strong run amid strong spending on the growth of artificial intelligence technology. Gains of 2.7 percent for Nvidia and 7.8 percent for Micron Technology were the two strongest forces that pushed the S&P 500 higher.
In stock markets abroad, indices were mixed across Europe and Asia. France’s CAC 40 fell 0.7 percent, and South Korea’s Kospi rose 4.3 percent for the world’s two biggest measures.
In the bond market, Treasury yields held modestly. The 10-year yield rose to 4.40 percent from 4.38 percent on Friday evening.
Harvests have moderated slightly this month, but remain higher than they were before the war began. Higher yields could raise mortgage rates and other types of credit to American households and businesses, which could slow the economy. Higher yields also tend to lower the prices of stocks and other types of investments.
A report on Monday said the pace of US pre-occupied home sales was weaker last month than economists had expected.
