(June 1): US stocks edged lower on Monday after an Iranian report that the country will stop exchanging messages with the US, triggering a spike in oil prices.
The S&P 500 Index was little changed at 10.04am in New York, putting the gauge at risk of snapping a seven-session streak of gains. The technology-heavy Nasdaq 100 Index fell 0.3%, while Brent crude rose 6.5% to US$97.06 a barrel.
Iran’s semi-official Tasnim news agency reported the halt of exchanges in protest of Israel’s escalation in Lebanon. The move signals increased tension between Washington and Tehran. The two sides have been trading messages over proposed changes to a draft agreement that would not only extend a ceasefire but reopen the Strait of Hormuz.
The report follows Iran accusing the US of sending conflicting signals and dragging out negotiations. Earlier Mohammad Bagher Ghalibaf, Iran’s Parliament Speaker and lead negotiator, said in a social media post that Israel’s escalation in Lebanon over the weekend and blockade on Iranian ports was “clear evidence of US noncompliance with the ceasefire”.
In a Truth Social post on Sunday, President Donald Trump said talks over an interim peace deal between the US and Iran would “work out well”. Constant speculation over whether Trump would agree to deal was not helping, the US leader added.
Earnings season is beginning to wind down, with just a handful of names left to report. AI will likely be a heavy focus, with the theme continuing to help the market move higher.
See also: US stock rally continues on peace deal hopes, AI spending optimism
Hewlett Packard Enterprise Co, Broadcom Inc and Crowdstrike Holdings Inc will be ones to watch as the three companies have been viewed as beneficiaries from the increased focus on AI. For HPE, which reports after the bell on Monday, there may be elevated expectations after a blowout report from peer Dell Technologies Inc.
Wells Fargo Investment Institute’s Paul Christopher said the AI rally will evenutally run out of steam, but added that it will look very different from dot-com era declines in 2000.
“One of most significant differences between today and the bull market top in March 2000 is that trailing earnings growth has been consistent with current total returns,” said Christopher. “People who are awaiting a replay of 2000, where a safe falls on them from out of the sky, Wile E Coyote style, are missing the effects of last year’s tax law.”
See also: Ordinary Americans deserve a fair shot at IPOs
Sectors in focus
- Watch engineering and construction firms Monday morning with construction spending data due at 10am in New York.
- After a 13% rally on Friday, watch Hewlett Packard Enterprise’s results on Monday afternoon.
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