US Stocks today: S&P, Nasdaq end lower as investors weigh Middle East conflict outlook
Why it matters: The S&P 500 and Nasdaq fell by 0.40% and 0.73% respectively, as investors priced out Federal Reserve rate cuts this year.
- Trump indicated serious discussions with a "more reasonable regime" to end the war, but simultaneously threatened to open the Strait of Hormuz or attack Iranian oil wells and power plants.
- Iran dismissed US peace proposals as unrealistic, highlighting a divergence in perspectives on de-escalation.
- Rick Meckler of Cherry Lane Investments noted the administration's "mixed messages" directly influence market sentiment, with positive news boosting the market and aggressive rhetoric causing sell-offs.
- The S&P 500 lost 25.52 points (0.40%) to 6,343.33, and the Nasdaq Composite fell 153.16 points (0.73%) to 20,795.20, while the Dow Jones Industrial Average gained 53.27 points (0.12%) to 45,219.91.
- Federal Reserve Chair Jerome Powell provided some market support by stating longer-term inflation expectations appear stable despite the energy shock, and the Fed doesn't need an immediate policy reaction.
- Money market participants have now priced out any Federal Reserve easing this year, a shift from the two rate cuts expected before the war, according to CME Group's FedWatch Tool.
- The S&P 500 energy index was slightly down, and technology stocks were a major drag on the S&P 500, while the financial index gained after new Department of Labor guidelines clarified alternative asset inclusion in 401(k) plans.
US stocks, particularly the S&P 500 and Nasdaq, closed lower as investors grappled with escalating Middle East tensions and mixed messages from the Trump administration regarding peace efforts and threats against Iran. Despite Federal Reserve Chair Jerome Powell's reassurances on inflation expectations, the conflict's impact on oil prices has led money markets to price out any Fed easing this year, a stark contrast to the two cuts anticipated before the war.
