Global stocks generally retreated, with the S&P 500 falling 1.21% to 7,420.10 and the Nasdaq Composite dropping 1.34% to 26,021.66. The Dow Jones Industrial Average also declined by 0.98% to 51,492.55. This decline was largely driven by a significant sell-off in technology and semiconductor shares, even though the Philadelphia semiconductor index later rallied 6.4% in subsequent trading. The initial dip on Wall Street came despite an interim peace deal between the US and Iran, which was expected to ease inflation fears by facilitating oil flows through the Strait of Hormuz.
The initial optimism surrounding the US-Iran deal, which saw President Trump and Iranian President Pezeshkian sign an MOU, was quickly overshadowed by investor concerns. The deal, intended to extend a ceasefire and allow for negotiations, aimed to release oil supply from the Persian Gulf, potentially lowering energy costs and easing inflation pressure. Vice President JD Vance's warning to Israel against targeting Hezbollah in Lebanon, however, introduced doubts about the deal's long-term stability and contributed to market uncertainty.
Adding to the market's woes was a hawkish shift from the Federal Reserve. Fed Chair Kevin Warsh emphasized the need to tame inflation, leading traders to bet on future rate hikes. The dollar index rose 0.45% to 100.80, reaching a one-year high, while US Treasury yields climbed. The 10-year Treasury note yield rose to 4.471%, and the 2-year yield touched 4.1759%. This hawkish stance and rising yields reinforced the idea that policymakers might need to tighten monetary policy, shifting investor sentiment away from riskier assets and towards the relative safety of the dollar and government bonds.
