Key Points:
- Wall Street stocks gained ground Thursday as investors reacted to potential peace talks between the United States and Iran.
- Global oil prices dropped below $100 a barrel as traders factored in a possible end to the blockade of the Strait of Hormuz.
- American technology companies cut thousands of jobs to fund massive new artificial intelligence projects.
- Massive quarterly profits from major technology firms drove a 24.6% earnings growth rate across the S&P 500 index.
Wall Street pushed higher on Thursday as investors grew optimistic about a potential end to the recent war with Iran. The positive mood boosted the broader stock market, although a sharp drop in oil prices dragged down the energy sector. By late morning, the S&P 500 index rose 0.17% to reach 7,377.96 points. The technology-heavy Nasdaq 100 index climbed 0.55% to hit 28,755.76 points. Meanwhile, the Dow Jones Industrial Average fell slightly, dropping 0.13% to sit at 49,847.06 points.
The United States and Iran plan to restart formal peace negotiations very soon. Negotiators currently work through mediators to draft a simple one-page framework agreement. According to recent reports, diplomats will travel to Pakistan next week to kick off the official discussions. This peace process will likely take at least a month to complete. Negotiators must resolve deep disagreements regarding Iranian nuclear ambitions and American economic sanctions. Key disputes remain over nuclear enrichment limits and international facility inspections.
President Donald Trump spoke to reporters at the White House on Wednesday afternoon and claimed the United States already won the war. He called the recent talks with Iranian leaders very good. Before he spoke to the press, Trump posted a message on social media stating the joint military operation with Israel would end soon if Tehran simply agreed to the current terms. However, the president also threatened to launch new military strikes if the two countries fail to sign a final agreement.
Iranian officials offered a mixed response to the American demands. The Iranian foreign minister said his government is currently reviewing the American proposal and will send an official response through Pakistan. Pakistan frequently acts as a mediator between the two hostile nations. Other Iranian officials criticized the proposal, calling it a massive American wish list. Analysts say the market treats these negotiations as a strong signal that both countries genuinely want to avoid another massive military escalation.
The sudden hope for peace sent global energy prices sliding. Oil traders are trying to determine exactly when the vital Strait of Hormuz will reopen to commercial shipping. Brent crude futures for July dropped 3.5% to hit $97.75 a barrel. West Texas Intermediate crude futures for June also fell 3.5% to settle at $91.71 a barrel. The recent military conflict effectively closed the strait, which normally handles about one-fifth of all global oil shipments.
Despite the recent price drop, energy costs remain much higher than before the war. This energy shock pushed American gasoline prices above $4.50 a gallon. Drivers have not paid prices this high since the middle of the global pandemic in 2022. Trump told reporters he actually expected oil prices to reach $200 or $250 a barrel during the conflict. The president added that the war with Iran remained worth the cost even if crude oil hit those massive price levels.
Away from the Middle East, investors digested new data regarding the American labor market. A recent report from Challenger, Gray, and Christmas showed that corporate job cuts jumped 38% in April. Companies fired 83,387 workers, marking the highest April layoff total since 2009. Technology companies announced the largest round of job cuts. Corporate leaders openly admit they fire workers to spend more on artificial intelligence research and innovation.
The United States Department of Labor released its own positive employment numbers. Only 200,000 Americans filed initial jobless claims last week. This number came in lower than the 205,000 claims economists originally expected. The number of Americans filing for continuing unemployment benefits also fell to 1.776 million. Economists now expect the upcoming Friday jobs report to show that employers added 60,000 new jobs, with the national unemployment rate sitting at 4.3%.
Massive corporate profits also helped Wall Street reach record highs this week. Companies continue to beat analyst expectations across the board. Experts project the S&P 500 index will report a massive 24.6% earnings growth rate for the first quarter. This represents the strongest corporate earnings growth the market has seen in two decades outside of a major economic recovery. All 11 sectors of the stock market posted positive growth for the first time in four years.
Artificial intelligence directly drives this massive financial boom. Major technology companies like Alphabet, Microsoft, and Meta reported incredible quarterly profits. Semiconductor giants like AMD and Arm also showed massive revenue gains. Analysts say the market has returned to artificial-intelligence mania. However, current stock prices do not look as expensive as they did last year, meaning the market has not reached a level of irrational exuberance just yet.
Individual stocks experienced wild swings after companies released their earnings reports. The British computer chip designer Arm beat Wall Street estimates and reported massive demand for its new data center chip. The stock initially soared but eventually dropped 8%. Executives admitted they lack the physical supplies needed to fulfill an extra $1 billion in orders for the new chip. Tapestry, the company that owns the Coach fashion brand, raised its annual forecast but still saw its stock slide 9%.
Other consumer companies showed mixed results. The food delivery service DoorDash gained more than 1% after executives issued a strong outlook for total orders in the upcoming second quarter. Meanwhile, the household appliance manufacturer Whirlpool watched its stock plummet 14.8%. The massive drop happened right after the company slashed its revenue forecast for the entire year.
