NEW YORK (AP) — U.S. stocks are rallying, and oil prices are falling Thursday after President Donald Trump said he called off his threat to bomb Iran in the evening, raising hopes for a deal that could get the global flow of crude going again.
The S&P 500 jumped 1.4%, coming off a back-to-back drop that had yanked it back to where it was in early May. The Dow Jones Industrial Average was up 839 points, or 1.7%, as of 1:45 p.m. Eastern time, and the
Nasdaq composite was 1.8% higher.
Stocks turned higher immediately after Trump said on his social media network that “discussions and final points have been, in both concept and great detail, approved by all parties involved,” and that the time and place of the signing will “be announced shortly.”
The price for a barrel of benchmark U.S. crude fell 3.2% to $87.19 after erasing earlier gains. Brent crude, the international standard, fell 3.5% to $89.89 per barrel, though it's still up from its roughly $70 price from before the war. An end to the war could reopen the Strait of Hormuz and would allow oil tankers to carry crude again from the Persian Gulf to customers worldwide.
Worries had been high because the United States and Iran launched attacks over the past several days after a more than monthlong tenuous ceasefire. While the strikes have escalated tensions in the region, they have been more limited compared to the early weeks of the war and talks aimed at extending the ceasefire are ongoing.
High oil prices have sent inflation painfully upward, and a report on Thursday showed that prices at the U.S. wholesale level increased by more in May than economists expected. The effect is worldwide, and the European Central Bank on Thursday became the first major central bank to raise interest rates in response.
Higher rates can keep a lid on inflation. But they also simultaneously slow entire economies and undercut prices for all kinds of investments, including stocks and cryptocurrencies. They hit investments seen as the most expensive in particular, and some critics are calling the artificial-intelligence industry a bubble where investment inflated too far.
Big swings for AI stocks have been pulling the U.S. stock market in their wake over the last week, as they went from roaring to records to suddenly turning lower. The big concern is whether such stocks shot too high, too fast because of AI mania, and they’ve been careening up and down, sometimes hour by hour.
Marvell Technology climbed 6.6%, for example. It’s coming off a manic stretch where it plunged 16.7%, soared 9.6% and then fell more than 5% for two straight days. Just before that, it had a one-day surge of 32.5% that was its best in history when Nvidia CEO Jensen Huang suggested it could be “the next trillion-dollar company.” It was worth a bit more than $190 billion at the time.
Companies involved in the making of chips jumped to some of the market's biggest gains. Lam Research jumped 11.2%, and KLA climbed 11%.
That helped offset a drop of 11.6% for Oracle. It reported a stronger profit for the latest quarter than analysts expected, but it also said it expects to raise $40 billion in cash this fiscal year through borrowing and sales of its stock. That comes after it raised $48 billion last fiscal year to help pay for AI investments.
Other companies’ stocks have also been punished recently for announcing heavy spending on AI, as the question remains whether all the investment can produce the profits and productivity that AI proponents are promising.
In the bond market, the yield on the 10-year Treasury eased to 4.47% from 4.55% late Wednesday as falling oil prices released upward pressure on inflation.
Stocks of smaller companies can feel the biggest benefit from easier in interest rates, and the Russell 2000 index of the smallest U.S. stocks jumped a market-leading 2.6%.
In stock markets abroad, indexes rose modestly in Europe following a mixed finish in Asia.
London’s FTSE 100 rose 0.5%, and Hong Kong’s Hang Seng fell 0.7% for two of the world’s bigger moves.
___
AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this report.
