U.S. stocks pulled back from all-time highs on Thursday as a yo-yo in oil prices jolted Wall Street and traders parsed contradictory signals on the prospects for a peace deal in the Iran war.
The S&P 500 fell 0.4% from its record, while the Dow Jones Industrial Average shed 313 points, or 0.6%. The tech-heavy Nasdaq composite slipped 0.1% from its own high. All three indexes were buffeted by a dramatic swing in crude oil: Brent, the international benchmark, briefly slumped near $96 a barrel after a spokesman for Pakistan’s foreign ministry said, “We expect an agreement sooner rather than later.” But the benchmark then erased much of that decline, briefly topped $102, and settled at $100.06 — down 1.2% on the day — after Iran said it was still reviewing the latest U.S. proposals.
Pakistan has been mediating talks between Washington and Tehran. An end to the war would be the primary route to reopening the Strait of Hormuz, the Persian Gulf waterway whose effective closure has trapped oil tankers and kept global crude supplies tight. Before the war, the 10-year Treasury yield stood at just 3.97%; it has since climbed and on Thursday edged up to 4.38% from 4.36% on Wednesday as oil prices pared their drops, pushing yields higher in a move that can raise borrowing costs for households and businesses.
Meanwhile, Iran has created a government agency to vet and tax vessels seeking passage through the strait, a shipping data company reported Thursday, a step that could add to the cost of fuel even if diplomatic progress is made.
Corporate earnings painted a mixed picture of how businesses and consumers are absorbing the war’s shocks. Datadog leapt 31.3% after the cloud-monitoring and security platform reported quarterly profit well above analysts’ expectations. Axon Enterprise, the taser and counter-drone products maker, rallied 10.6% after raising its full-year revenue forecast, partly on demand for counter-drone technology. Albemarle, a lithium and specialty chemicals producer, rose 3% on better-than-expected results.
On the losing side, Whirlpool tumbled 11.9% after results fell far short of estimates; the appliance maker said it was instituting the largest price increases in a decade for major appliances in North America while accelerating cost cuts as it contends with weaker consumer confidence. Shake Shack dropped 28.3% after its quarterly results badly missed expectations. McDonald’s stock held relatively steady, slipping 0.1%, after revenue edged past analysts’ forecasts, but CEO Chris Kempczinski warned that high gasoline prices and consumer anxiety about the war could dent sales this spring.
Economic data offered little clarity. The number of U.S. workers applying for unemployment benefits rose last week, but the increase was smaller than economists had expected. A separate report showed that worker productivity improved by only half the rate that economists had projected for the latest quarter.
Overseas, European indexes fell — stocks dropped 1.5% in London and 1.2% in Paris — while Japan’s Nikkei 225 surged 5.6% as Tokyo reopened after a holiday and caught up with big gains elsewhere in Asia. The Nikkei has soared nearly 71% over the past twelve months on strength in tech stocks tied to artificial intelligence. Takashi Hiroki, chief strategist at MONEX, described the run as “a kind of bubble because buying activity concentrated on leading AI, artificial intelligence stock and semiconductor-related stocks. It’s a situation where only semiconductor stocks are being bought.”