(Bloomberg) -- U.S. stocks rose to records and Treasuries fell after President Donald Trump toned down rhetoric against Iran. Equities closed well off highs as reports of fresh rocket attacks in Baghdad heightened investor jitters.
The S&P 500 jumped to an intraday record after the U.S. president suggested further military action against Iranian targets is not necessary. The rally faded into the close after reports that rockets hit the Green Zone in Iraq’s capital where the U.S. embassy is located. Equities had swooned overnight around the world after Iran launched missiles at U.S. bases in Iraq, escalating tensions that flared last week.
“The dip in markets was only a partial retracement of the gains seen since President Trump spoke, which shows the limited impact,” said Sameer Samana, senior global market strategist for Wells Fargo Investment Institute. “While geopolitical risks are here to stay, and will cause episodic volatility, we don’t believe the current circumstances warrant a change in the investment outlook.”
Trump’s statement had calmed financial markets, sparking sharp reversals in assets from oil to gold and Treasuries. U.S. crude ended near $60 a barrel, $5 lower than its overnight highs. Ten-year yields topped 1.86% after falling below 1.8%, and gold slumped more than $40 an ounce from its highs. In company news, Boeing Co. slumped after one of its planes crashed in Iran. Walgreens Boots Alliance sank 6% after the drugstore giant’s profits slid, while Lennar Corp. advanced as its earnings topped estimates.
“The main market driver right now is the generally improving macroeconomic backdrop and most other things are a distraction from that overriding theme,” Michael Reynolds, investment strategy officer at Glenmede, said by phone. “I think the loudest distraction has certainly been the geopolitical tension between the U.S. and Iran going back and forth.”
Before the late-session drop, markets had settled back into the familiar risk-on mood that pushed benchmarks to recent records amid optimism sparked by signs of a resilient global economy as well as a partial Sino-American trade deal. Investors are also watching the nonfarm jobs report due Friday. A gauge of private employment beat expectations Wednesday.
Read here for more on the ongoing market impact:
Buy the Dip, Wait and See, Add Hedges: Investors on Iran StrikeGlobal Market Reaction to Iran Rocket Attack in Four ChartsGold Surges Above $1,600 as Iran Attacks Spark Flight to HavensAlgos Seize on Iran Headlines to Leave Some Traders With Losses
Here are some events to watch for this week:
President Trump said he would make a statement on Wednesday morning in wake of the Iran attack.Federal Reserve officials Richard Clarida, John Williams, James Bullard and Charles Evans speak on Thursday.The U.S. monthly non-farm employment report is due Friday.
These are moves in major markets:
The S&P 500 Index advanced 0.5% as of 4 p.m. New York time.The Stoxx Europe 600 Index rose 0.2%.The MSCI Asia Pacific Index decreased 0.9%.
The Bloomberg Dollar Spot Index added 0.2%.The British pound fell 0.2% to $1.3100.The euro dipped 0.4% to $1.1111.The Japanese yen declined 0.7% to 109.19 per dollar.
The yield on 10-year Treasuries rose five basis points to 1.87%.The yield on two-year Treasuries gained four basis points to 1.58%.Britain’s 10-year yield added three basis points at 0.817%.
West Texas Intermediate crude fell 4.5% to $59.91 a barrel.Gold dropped 1.2% to $1,555.70 an ounce.
--With assistance from Todd White.
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