This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.nytimes.com/2020/01/08/business/global-markets.html

The article has changed 4 times. There is an RSS feed of changes available.

Version 2 Version 3
Markets Recoil, and Then Rally, as Traders Absorb Iran Attack Stocks Rally as Iran Worries Ease and Corporate Outlook Brightens
(about 4 hours later)
Investors signaled their relief on Wednesday after President Trump backed away from further confrontation with Iran, a day after Iranian missile strikes on American positions in Iraq. Stocks climbed on Wednesday, with the Nasdaq composite hitting a record, after President Trump backed away from further confrontation with Iran. A handful of upbeat corporate updates also pointed to growing signs of economic strength.
Stocks in the United States climbed to new highs shortly after the conclusion of the president’s speech, in which he said the strikes produced no American casualties and that Iran now “appears to be standing down.” The S&P 500 shot higher shortly after Mr. Trump concluded a speech from the White House on Wednesday morning, in which he said that Iranian missile strikes on American positions in Iraq had produced no American casualties and that Iran now “appears to be standing down.”
Oil prices, which had spiked after the missile attacks Tuesday night and fallen early Wednesday, fell further after the televised address. Brent crude, the international benchmark, and West Texas intermediate, were down more than 3.5 percent and 4 percent shortly after midday. By the end of the day, the index was up 0.5 percent, at 3,253.05, just shy of a record. The tech-heavy Nasdaq composite rose 0.7 percent to reach its new high.
At the same time, the S&P 500 was up more roughly 0.7 percent to nearly 3,260. If the market holds that level until the end of the trading day, it would be a record, overtaking the previous high-water mark set on Jan. 2. Oil prices, which had spiked after the missile attacks on Tuesday night, tumbled after the televised address.
The rise was driven in part by fuel-sensitive sectors of the market, which benefit when crude prices decline. Airline stocks jumped, with Delta up more than 2.5 percent shortly after midday. Alaska Air and American Airlines were up both up about 2 percent. The initial nervousness in financial markets had eased even before Mr. Trump’s statement, after Iran’s foreign minister suggested that the country was ready to stand down for now.
Safe havens such as Treasury bonds and gold — markets where investors typically seek shelter during times of crisis — also reflected the easing tension. Brent crude, which had jumped about 5 percent to as high as $71.75 a barrel immediately after news of the Iranian missile attack Tuesday night, wound up dropping 4.1 percent to $65.44.
Even before Mr. Trump’s statement, the nervousness in financial markets eased after Iran’s foreign minister suggested that he was ready to stand down for now and President Trump suggested the damage from the attack had been limited, raising hopes of a restrained conflict in a region critical to world oil supplies. The decline in crude oil costs lifted fuel-reliant sectors of the American stock market: Airline stocks jumped, with Delta shares up 2.2 percent and American Airlines up 2.3 percent.
Brent crude jumped about 5 percent overnight to as high as $71.75 a barrel, immediately after news of the Iranian missile attack. But within hours it had fallen back sharply. But the gains on Wednesday weren’t just a reaction to the pause in hostilities in the Middle East.
West Texas intermediate crude also jumped and then receded, and was trading at about $62.95 a barrel by Wednesday afternoon, about 0.2 percent lower from Tuesday. A number of companies reported better-than-expected results, signaling growing optimism about the health of the economy and the outlook for profits. That optimism will be crucial to keeping the decade-long bull market for stocks rolling in 2020.
In stock trading, Britain’s FTSE 100 was unchanged, while Germany’s DAX rose about 0.7 percent. In Asia, Hong Kong’s Hang Seng ended the day 0.8 percent lower, and Japan’s Nikkei fell 1.6 percent. Shares of the homebuilder Lennar rose 0.8 percent after it reported better-than-expected earnings and sales results before the open of trading on Wednesday.
Mohammad Javad Zarif, Iran’s foreign minister, said in a tweet that the nation had “concluded proportionate measures in self-defense.” The statement followed two missile attacks on bases in Iraq housing American forces in response to the killing last week of Maj. Gen. Qassim Suleimani. On a conference call to discuss the results, Lennar executives told analysts that consumers continued to have confidence in the economy and in the job market. Low mortgage rates and unemployment near 50-year lows are also helping to support residential real estate.
In his own tweet shortly after, Mr. Trump suggested that damages and casualties sustained by American forces had been minimal, though the assessment was continuing. “All is well!” he said on Twitter. Shares of Constellation Brands — the beer and wine company that owns the Corona and Modelo brands — jumped 3.6 percent after it beat Wall Street expectations for earnings and revenue in quarterly results, and raised its profit forecast for the year.
The risk of a war between the United States and Iran, in the world’s most important oil-producing region, the Persian Gulf, has sent shudders through the oil markets in recent days. The fear is that an attack on shipping from the Gulf, or damage to the oil fields of a major producer in the area like Iraq or Saudi Arabia, could restrict global supplies. On Tuesday, Microchip Technology raised its sales forecast, and company executives suggested that they had seen a bottom in the demand for its devices in China, which was hit hard last year during the worst of the trade war between Washington and Beijing.
On Wednesday, officials from the Organization of the Petroleum Exporting Countries, the producers’ group, sought to calm fears that the crisis could lead to a major disruption in supplies. “There are signs everywhere that the demand is returning,” Steve Sanghi, Microchip’s chief executive, said at an investor conference on Tuesday.
“We are not forecasting any shortage of supply unless there is a catastrophic escalation, which we don’t see,” Suhail Mohamed Faraj al-Mazrouei, the oil minister of the United Arab Emirates, told reporters in Abu Dhabi on Wednesday, Reuters reported. The outlook for corporate profits will be a major focus for investors in the coming weeks, as the earnings reporting season unfolds.
Markets have become so accustomed to a surplus of oil in the global market that they are not as worried about tensions in the Persian Gulf region as they once were. The S&P 500 rose 28.9 percent in 2019 — one of the best annual performances in decades — with little in the way of profit growth. But that rally made stocks look overvalued according to key metrics like price-to-earnings ratios. Without profit growth to support last year’s gains, the market could falter, analysts say.
“Oil has become a broken barometer for gauging Middle East tensions,” Helima Croft, head of global commodity strategy at RBC Capital Markets, an investment bank, said on Tuesday. “It now only reacts after something seismic happens.” Other markets also suggested an improving outlook for growth. Prices for safe-haven investments like Treasury bonds and gold — markets where investors typically seek shelter during times of crisis — fell on Wednesday, reflecting an easing of worries tied to the situation in Iran.
The drop in prices for Treasury securities pushed bond yields — which move in the opposite direction — up sharply, which also suggests a rosier outlook for economic growth and inflation. The yield on the 10-year Treasury note climbed to 1.88 percent.
Higher yields also helped supercharge the share prices of financial firms, which tend to benefit from higher bond yields, as they serve as the basis for consumer lending rates.
The S&P 500 financial sector was one of the better performing parts of the American market on Wednesday, rising 0.5 percent.
But tech was the clear winner. Apple and Microsoft, whose enormous size gives them outsize sway over market-cap-weighted indexes such as the S&P 500, both rose 1.6 percent.
In global stock trading, Britain’s FTSE 100 was up slightly, while Germany’s DAX rose about 0.7 percent. In Asia, Hong Kong’s Hang Seng ended the day 0.8 percent lower, and Japan’s Nikkei fell 1.6 percent, well before Mr. Trump’s remarks.