U.S. stocks experienced a notable rise on Thursday, largely driven by a decline in oil prices from their recent four-year highs and positive earnings reports from major technology companies that underscored growing optimism regarding demand for artificial intelligence (AI). The Dow Jones Industrial Average futures climbed approximately 0.7%, recovering from a sluggish performance on Wednesday. Similarly, contracts on the tech-heavy Nasdaq 100 increased by 0.3%, while those on the S&P 500 also saw a gain of about 0.3%.
In the early morning session, oil prices surged to their highest levels since 2022 following an Axios report indicating that then-President Donald Trump was considering new military options regarding Iran. Brent crude futures jumped by 7%, surpassing $126 a barrel due to fears of escalating tensions in the Middle East. However, prices later retreated, settling below $117 amid volatile trading conditions.
A slew of quarterly earnings reports from major tech companies was released on Wednesday, revealing that AI spending remains robust, with a forecasted total of $725 billion for the year. Despite this optimistic outlook, investor reactions varied. Shares of Alphabet and Amazon rose after surpassing earnings expectations, while Meta Platforms struggled, seeing a decrease due to weaker-than-anticipated capital expenditures. Additionally, Microsoft saw a slight dip of 1% despite reporting higher revenue and profits than expected. Anticipation is now mounting for Apple’s earnings report, scheduled for release after the market closes, as investors remain keenly interested in how AI investment will impact revenue streams.
Looking ahead, market participants are closely monitoring the upcoming release of the March PCE inflation reading, amidst growing divisions within the Federal Reserve regarding the future course of monetary policy. The Fed had recently opted to keep interest rates unchanged, with Chair Jerome Powell affirming his intention to serve beyond his current term.
In geopolitical news, oil prices surged to dramatic heights amidst reports that former President Trump was preparing for a military briefing on further actions against Iran. Brent oil surged up to 7.1%, reaching its highest intraday level in four years. This surge followed an indication that U.S. Central Command would discuss options for renewed military operations in the Middle East. Following the long-standing ceasefire that has held since early April, recent diplomatic efforts to negotiate a resolution have faltered, leading to ongoing tensions and fuel blockades in the Strait of Hormuz.
The Strait of Hormuz has effectively been closed since the conflict escalated in late February, creating significant restrictions on oil and gas supplies, and subsequently driving energy prices higher. Recent discussions among Trump and oil executives have revolved around strategies to extend the blockade while minimizing repercussions for American consumers.
In Asia, a contrasting trend has emerged as the artificial intelligence sector continues to bolster markets despite the strains caused by the U.S.-Iran conflict. Asia’s tech stocks have surged nearly 10% since the conflict began, leading to an all-time high for the region’s technology index. In stark contrast, other sectors have struggled, with consumer discretionary stocks down nearly 11%. This dichotomy highlights ongoing concerns about rising energy costs and their potential impact on household spending and corporate profitability across oil-importing economies.
Strategists indicate that the growing divergence in market performance may persist amid uncertainty over the reopening of the Strait of Hormuz, as the tech sector remains buoyed even while the broader economy grapples with the repercussions of geopolitical tensions. One market analyst noted that the resilience in tech stocks is not so much a sign of confidence but rather a reflection of the elimination of options as other sectors face direct exposure to higher energy costs and stagnating demand.
