Stan Choe
Oil prices are rising as the war with Iran threatens to drag on for longer, but the US stock market is nevertheless inching toward more records.
The price for a barrel of Brent crude oil climbed 2.7 per cent to $US104.02 after President Donald Trump said the US-Iran ceasefire was on “life support” after he rejected Iran’s latest proposal to end their war. The rejection raises the stakes for Trump’s trip this week to China, where he could urge President Xi Jinping to pressure Iran into making concessions. Xi has leverage because China is the biggest buyer of Iran’s sanctioned crude oil.
The war has already sent the price for a barrel of Brent up from roughly $US70 and delivered a blast of painful inflation through the global economy. That’s because it has shut the Strait of Hormuz and kept oil tankers stuck in the Persian Gulf instead of delivering crude to customers worldwide.
Still, the US stock market has been setting records recently on hopes that the war will not keep oil prices high for very long. US companies are meanwhile producing even bigger profits than analysts expected, while signals suggest the US economy is holding up even though households are feeling discouraged by expensive gasoline and tariffs.
On Wall Street, the S&P 500 rose 0.3 per cent from its record. The Dow Jones was up 107 points, or 0.2 per cent, and the Nasdaq composite was 0.3 per cent higher and on track to set its own all-time high. The Australian sharemarket is set to climb, with futures at 4.59am AEST pointing to a gain of 18 points, or 0.2 per cent, at the open. The ASX lost 0.5 per cent on Monday. The Australian dollar was trading at US72.50¢.
Mosaic helped drag on the market after the fertiliser company reported much weaker results for the latest quarter than analysts expected. The company is benefiting from higher prices for its products, but it’s also contending with much higher prices for sulfur and other raw materials because of logistics snarls created by the war with Iran.
Mosaic’s stock fell 1.5 per cent, and more stocks within the S&P 500 sank than rose.
Stocks of companies whose customers have the least cushion to absorb higher gasoline prices struggled, and Dollar General fell 6.8 per cent. Businesses with big fuel bills likewise had some of the market’s sharpest losses, including drops of 4.4 per cent for Carnival and 3.2 per cent for Southwest Airlines.
Helping to offset that was Fox, which rose 4.8 per cent after reporting stronger profit and revenue for the latest quarter than analysts 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 topped profit expectations, and they’re on track to deliver overall growth of nearly 28 per cent, according to FactSet. If that turns out to be the case, it would be the best growth since the end of 2021.
Outside of earnings reports, Beazer Homes USA soared 34.8 per cent after Dream Finders Homes offered to buy it in a deal valuing it at roughly $US704 million. A combination would create the country’s seventh-largest homebuilder, and Dream Finders is asking Beazer’s shareholders to push its management and board to OK the deal after making several attempts itself.
Dream Finders added 1.5 per cent.
Tech stocks were also strong, continuing their big run amid big spending in the boom around artificial-intelligence technology. Gains of 2.7 per cent for Nvidia and 7.8 per cent for Micron Technology were two of the strongest forces pushing upward on the S&P 500.
In stock markets abroad, indexes were mixed across Europe and Asia. France’s CAC 40 fell 0.7 per cent, and South Korea’s Kospi soared 4.3 per cent for two of the world’s bigger moves
In the bond market, Treasury yields held relatively steady. The 10-year yield rose to 4.40 per cent from 4.38 per cent late Friday.
Yields have moderated a bit this month, but they remain well above where they were before the war began. Higher yields can raise rates for mortgages and other kinds of loans going to US households and businesses, which in turn can slow the economy. Higher yields also tend to push downward on prices for stocks and other kinds of investments.
A report on Monday said the pace of sales for previously occupied US homes was weaker last month than economists expected.
