It has been said that investors have been looking past the US/Iran war on the assumption that it wouldn’t last for long. It is now in its tenth week, and the Strait of Hormuz remains closed to most shipping, while the US Navy continues to blockade Iranian ports in the region.
But traders have now added a ‘peace dividend’ to US stock indices. This follows reports that the US and Iran are ‘closing in’ on a one-page memo to end the war.
The news led to an $8 drop in the price of a barrel of oil, while helping to lift the S&P 500, NASDAQ and Russell 2000 to fresh all-time intra-day highs. Only the Dow, despite a near 1% rally this morning, remains adrift from its own all-time highs from early February.
Source: TN Trader
As things stand, it’s unclear what will be in the memo. Will it include an agreement to end Iran’s nuclear ambitions? And what will become of the Strait of Hormuz? If Iran’s Islamic Revolutionary Guard Corps are left in control of the route, does that mean that the Trump administration will agree that Tehran can levy a charge on shipping passing through international waters? These questions are of great importance. But for now, investors just want to party on.
Investors were already in a buoyant mood due to an exceptionally strong first-quarter earnings season, where, with over 63% of S&P 500 constituents having reported, year-on-year earnings growth stood at over 27% while revenues were up more than 10% annually.
Advanced Micro Devices (AMD) added to the positive sentiment after it reported a strong set of numbers after the close, along with unexpectedly positive guidance for the second quarter. The stock was up 18% in after-hours trade. The news helped to lift Super Micro Computer by 16%, and Micron Technology tacked on 6%. Both AMD and Micron Tech are now up 112% since the end of March.
