The major U.S. stock indexes on Monday rose from their lowest level this year, after President Donald Trump claimed earlier in the day the U.S. held “productive” talks with Iran, resulting in a “relief rally” for stocks that also prompted a decline in oil and gold prices.
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Key Takeaways
- The Dow Jones Industrial Average increased by 631 points, or 1.3%, on Monday, alongside gains of 1.1% and 1.3% for the S&P 500 and Nasdaq, respectively.
- Before Monday, the Dow and Nasdaq were approaching correction territory (down at least 10% from a recent high) after both indexes on Friday were down roughly 9% from their all-time closing highs, while posting their fourth-straight losing week.
- Brent Crude, the international oil benchmark, plunged by 9.7% to around $96 on Monday after falling below $92 earlier in the day.
- Palantir headlined gains across the tech-heavy Nasdaq, rising 6.7%, with further growth from Broadcom (4%), Shopify (3.7%), Tesla (3.5%) and Amazon (2.3%), while 3M (3.8%), Home Depot (3.1%), Caterpillar (3%), Goldman Sachs (2.1%) and Nvidia (1.7%) pulled up the Dow.
- Gold futures, which earlier Monday fell by as much as 8.2% to their lowest point this year, dropped by more than 3.9% to around $4,429 by Monday afternoon, as spot gold prices declined 2.1% to about $4,394, similarly paring back losses from an earlier plunge of 8.1%.
- That marks a further decline in gold prices, which dropped 11% last week, their largest weekly loss since 1983.
Why Did Stocks Rally Today?
Trump on Monday said the U.S. held “very good” and “productive” talks with Iran for a “complete and total resolution” to the war, despite Iran’s foreign ministry later denying having held talks with the U.S., while also accusing Trump of market manipulation. Trump said he ordered the Pentagon to postpone strikes against Iranian power plants and energy infrastructure for five days. This quickly fueled a premarket surge for the Dow, which soared by more than 1,100 points at times in early and intraday trading. Jay Woods, chief market strategist for Freedom Capital Markets, wrote Monday to look for “relief rallies” to open the week after Trump’s comments, but noted Trump’s call for just five days of postponed attacks “may prevent a stronger and more lasting rally.” Daniela Hathorn, senior market analyst at Capital.com, wrote that Trump’s message reinforces the idea that the Trump administration is “actively seeking an exit” from the Iran war, as markets are “far more sensitive” to signs of de-escalation.
Key Background
Trump signaling progressive talks with Iran marks a stark reversal from his tone over the weekend, during which he threatened Iran to reopen the Strait of Hormuz by Monday or the U.S. would “obliterate” Iran’s power sites. Stocks have steadily declined since the U.S. and Israel struck Iran last month, with surging oil and energy prices stoking fears of higher and prolonged inflation in the U.S. A further decline this month for the S&P 500 and Dow pushed both below their 200-day moving averages—used to track the long-term trend of an equity—for the first time in nearly a year. The small-cap Russell 2000 became the first U.S. market index to enter correction territory after it closed Friday down nearly 11% from its all-time high. Federal Reserve Chair Jerome Powell said last week it was “too soon” to know how the war would disrupt the U.S. economy, but noted it would have an “uncertain” impact, specifically whether oil and energy prices would boost inflation.
This story was originally published on forbes.com and all figures are in USD.
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