The American stock indices ended higher this Monday, boosted by a renewed sense of optimism after Donald Trump announced the postponement of military strikes targeting Iranian infrastructures, amid perceived constructive signals with Tehran. The markets reacted positively to this announcement, seeing it as a possible de-escalation of the conflict. The S&P 500 rose by 1.15% to 6,580.9 points. The Dow Jones gained 1.38% to 46,208.5 points, while the Nasdaq 100 advanced by 1.22% to close at 24,188.5 points.
However, the increase was more pronounced at the start of the session, slowing down after a statement by the Iranian Minister of Foreign Affairs. He denied the American President’s statements, stating that no discussions had taken place with Washington and that the conditions to end the conflict remained unchanged. Despite this denial, some sources indicate that Israeli officials still consider the opening of discussions between the United States and Iran possible in the coming days. In this context of relative calm, oil prices plummeted by over 10% during the day.
Following Donald Trump’s statements, investors also adjusted their expectations regarding monetary policy. According to the CME’s FedWatch tool, the probability of a rate hike in December dropped to 16%, from 25% the day before.
The markets now anticipate a more than 70% chance of no change by the end of the year. This shift follows a downward revision in expectations for a rate cut the previous week, in a context of a firmer stance by the Fed on inflation.
The significant drop in oil prices supported transportation-related stocks, which are highly sensitive to fuel costs. American Airlines and United Airlines rose by 3.64% and 4.46% respectively, while Norwegian Cruise Line surged by 6.23%.
On an individual stock level, Synopsys gained 2.89% following the announcement of a multi-billion dollar stake by activist fund Elliott Investment Management.
Investors are now closely watching for upcoming statements from Federal Reserve officials, as well as economic activity indicators and consumer confidence data expected during the week.
