Markets drifted lower on Wall Street on Friday and oil prices eased ahead of planned U.S.-Iran talks following a shaky ceasefire agreement, though investors continued to treat the situation as unstable. The main indexes each logged a weekly gain for a second straight week, but trading remained choppy as investors weighed whether optimism about a possible resolution would translate into steadier energy prices.
The S&P 500 inched 0.1% lower after a day of swings, while the Dow fell 0.6% and the Nasdaq rose 0.4%. The move left stocks still prone to large swings based on developments tied to the war, even as the S&P 500 had erased most of its losses from March and was about 2.3% short of its all-time high set in January.
Oil prices have played an outsized role in driving market volatility during the Iran conflict, in part because shipping through the Strait of Hormuz had essentially stalled since the war began. Brent crude, the international benchmark, had moved from roughly $70 per barrel before the war began in late February to more than $119 at times, and Friday marked another dip as trading approached the weekend talks.
Brent crude for June delivery fell 0.8% to $95.20 per barrel, while U.S. crude for May delivery dropped 1.3% to $96.57. Ahead of the negotiations, uncertainty remained high: Iran’s semiofficial Tasnim news agency said talks would not happen unless Israel stopped its attacks in Lebanon.
The planned talks were slated for Saturday in Pakistan between negotiators from Iran and the U.S. Even with oil easing, the market’s focus on the ceasefire and what comes next underscored how quickly the conflict has been able to move energy prices and, in turn, investor expectations.
The war-related energy shock has also fed into U.S. inflation concerns. The U.S. government reported a sharp jump in inflation in March that was described as the biggest spike in four years as prices at the gas pump rose, narrowly missing economists’ expectations, and the report helped keep inflation in focus for the Federal Reserve.
Bond yields rose modestly after the latest inflation update. The yield on the 10-year Treasury climbed to 4.32% from 4.29% late Thursday, a backdrop that can weigh on stocks by tightening borrowing conditions even when markets want rate cuts to support equities.
Investors also looked to broader signals from consumer sentiment, another factor tied to inflation expectations. Consumer sentiment slumped 10.7% in April, according to the University of Michigan’s closely watched monthly survey, and the survey showed year-ahead inflation expectations rising to 4.8% in April from 3.8% in March.
Analysts warned that the impact of the oil supply shock could keep reverberating even if the immediate inflation reading came in under expectations. Jamie Cox, managing partner at Harris Financial Group, wrote in a research note that although the April effects were likely to be worse than March’s, the March effects were less than expected.
Within stocks, most companies in the S&P 500 lost ground on Friday, with health care and financials weighing on the index. Eli Lilly and Co. fell 1.6% and Charles Schwab closed 2.5% lower, while technology stocks with large market weights helped offset some declines.
Nvidia rose 2.6% and Broadcom gained 4.7%, supporting the Nasdaq even as other sectors pulled back. Markets in Asia gained ground while Europe’s markets were mixed.