US stocks rally after Trump postpones strikes on Iran’s power plants

NEW YORK – The three main US stock indexes finished the session on March 23 up more than 1 per cent 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, Iranian Parliamentary Speaker Mohammad Baqer Qalibaf posted on social media that no talks had been held with the US, contradicting Mr 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 US equities fell last week, they staged a sharp recovery on March 23 after Mr Trump’s comments sent oil prices lower. Equities had been trading lower earlier in the day 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 Mr Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

With oil prices settling down more than 10 per cent on March 23 Wall Street’s three main stock indexes registered their biggest single-day percentage gains since Feb 6.

The Dow Jones Industrial Average rose 631 points, or 1.38 per cent, to 46,208.47 while the S&P 500 gained 74.52 points, or 1.15 per cent, to 6,581 and the Nasdaq Composite gained 299.15 points, or 1.38 per cent, to 21,946.76.

The CBOE Volatility Index, Wall Street’s fear gauge, retreated after earlier hitting 31.04, its highest level in two weeks. The index pared some losses to end down 0.63 points at 26.15.

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 per cent, while defensive sectors were weaker with healthcare finishing barely higher and consumer staples closing up 0.37 per cent.

“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 Mr 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 US Federal Reserve to a roughly 13 per cent probability for December from just above 25 per cent in the prior session, according to CME Group’s FedWatch.

Traders were betting on a roughly 72 per cent chance that rates would be unchanged by the 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 March 23 to finish up 2.3 per cent. On March 20, the index, which is sensitive to higher interest rates, had ended more than 10 per cent below its record close of Jan 22, confirming it had been in correction territory.

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 per cent while American Airlines added 3.66 per cent. Shares in cruise ship operators soared, with Norwegian Cruise Line adding more than 6 per cent while Carnival Corp and Viking Holdings both climbed more than 5 per cent.

Banks, which had weakened during the conflict, gained ground on March 23 with the S&P 500 Banking index adding more than 1 per cent to record its biggest daily gain since Feb 25. JPMorgan Chase added 1.2 per cent while Goldman Sachs rose 2.2 per cent.

Investors will look forward to Fed speakers, business activity surveys and consumer sentiment readings this week. In individual stocks, Synopsys rallied 2.9 per cent after Reuters reported that activist investor Elliott Investment Management has amassed a 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 seven new 52-week highs and eight new lows while the Nasdaq Composite recorded 34 new highs and 154 new lows.

On US exchanges, about 20.94 billion shares changed hands compared with the moving average of 20.68 billion for the last 20 sessions. REUTERS