Stocks close sharply higher, oil tumbles, after Trump postpones strikes on Iran’s power plants
The three main U.S. stock indexes as well as the TSX finished Monday’s session up more than 1% as oil prices fell after President Donald Trump said he had ordered the military to postpone strikes against Iranian power plants following “productive conversations” with Tehran.
However, Iran’s Parliamentary Speaker Mohammad Baqer Qalibaf posted on social media that no talks had been held with the U.S., contradicting Trump’s announcement that there were talks between the United States and Iran in the past day in which the two sides had “major points of agreement” and that a deal could be done soon to settle the war.
While equities fell last week, they staged a sharp recovery on Monday after Trump’s comments sent oil prices lower. Equities had been trading lower earlier in the day on Monday after threats of attacks on Israeli and Iranian power networks.
“You never know who to believe but it does appear that Trump is trying to start discussions with somebody in Iran to resolve the war despite strong denials from Iran. This has caused significant optimism in stock prices today with the market up strongly although off its highest levels because of the Iranian denials,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
With oil prices settling down more than 10% on Monday, Wall Street’s three main stock indexes registered their biggest single-day percentage gains since February 6.
The Dow Jones Industrial Average rose 631.00 points, or 1.38%, to 46,208.47 while the S&P 500 gained 74.52 points, or 1.15%, to 6,581.00 and the Nasdaq Composite gained 299.15 points, or 1.38%, to 21,946.76.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 566.40 points, or 1.8%, at 31,883.81, its biggest advance since February 13. On Friday, the index posted its lowest closing level in three months.
The TSX technology sector rose 3.4%, with shares of electronic equipment company Celestica Inc up 6.6%.
The materials group added 3.2%. Copper prices climbed but the price of gold was down 2.1%. Industrials rose 1.9%. Heavily weighted financials were up 1.8%. Just two of the 10 major TSX sectors ended lower, including energy. It lost 1.3%.
The CBOE Volatility Index, Wall Street’s fear gauge, retreated after earlier hitting 31.04, which its highest level in two weeks. The index pared some losses to end down 0.63 points at 26.15.
“The volatility is likely to continue and it’s all about the price of oil. Nothing else really matters to people in the short term. So when oil prices are down, stocks go up and vice versa,” said Bob Doll, chief investment officer at Crossmark Global Investments. “What’s up the most today is not a surprise. It’s things with economic sensitivity.”
Meanwhile, investors trimmed bets for an interest-rate hike from the U.S. Federal Reserve to a roughly 13% probability for December from just above 25% in the prior session, according to CME Group’s FedWatch.
Traders were betting on a roughly 72% chance that rates would be unchanged by year end after scaling back bets for cuts last week after the central bank struck a hawkish tone due to concerns about higher inflation.
With that, the small-cap Russell 2000 outperformed large-cap indexes on Monday to finish up 2.3%. On Friday, the index, which is sensitive to higher interest rates, had ended more than 10% below its record close of January 22, confirming it had been in correction territory.
Traders also trimmed bets for Bank of Canada rate hikes. Markets are now pricing in two quarter-point rate hikes by the end of this year, instead of the three they had priced in on Friday. The rate sensitive Canadian two-year bond yield was down about 10 basis points on Monday.
All of the S&P 500’s 11 major industry sectors advanced with big gains in cyclical sectors such as consumer discretionary , which finished up 2.46%, while defensive sectors were weaker with healthcare finishing barely higher and consumer staples closing up 0.37%.
Shares rallied in airlines, which are hugely sensitive to the price of oil because of jet fuel costs. Alaska Air and United Airlines shares both rose more than 4% while American Airlines added 3.66%. In Toronto, Air Canada shares rose 3.1%.
Shares in cruise ship operators soared with Norwegian Cruise Line adding more than 6% while Carnival Corp and Viking Holdings both climbed more than 5%.
Investors will look forward to Fed speakers, business activity surveys and consumer sentiment readings this week.
In individual U.S. stocks, Synopsys rallied 2.9% after Reuters reported that activist investor Elliott Investment Management has amasseda multibillion-dollar investment in the electronic design automation firm.
Advancing issues outnumbered decliners by a 3.6-to-1 ratio on the NYSE where there were 59 new highs and 109 new lows. On the Nasdaq, 3,546 stocks rose and 1,229 fell as advancing issues outnumbered decliners by a 2.89-to-1 ratio. The S&P 500 posted 7 new 52-week highs and 8 new lows while the Nasdaq Composite recorded 34 new highs and 154 new lows. On U.S. exchanges about 20.94 billion shares changed hands compared with the moving average of 20.68 billion for the last 20 sessions.
Reuters, Globe staff
