The major U.S. stock indices opened on May 6 with a spike, fueled by reports of a potential deal between the U.S. and Iran. Axios reported on May 6, citing sources, that both parties are close to an agreement aimed at ending the Middle Eastern conflict. However, U.S. President Donald Trump told the New York Post that it's 'still too early' to prepare for a peaceful settlement. Shortly after Axios's publication, the U.S. President warned on TruthSocial that he would resume bombings against Iran if Tehran does not ensure the free passage of vessels through the Strait of Hormuz.
Details
Against this backdrop, the broad index of American stocks, the S&P 500, jumped 0.8% in the first minutes of trading, the tech-heavy Nasdaq Composite is up 0.89%, the blue-chip Dow Jones gained over 1%, and the small and mid-cap Russell 2000 is up 1.75%.
Brent oil for July delivery has partially recovered from the drop on May 5 (at its lowest, it fell to $96.75) and is currently trading at $103.4 per barrel. North American WTI, after dropping to $88.66, has risen to $96.4 per barrel, but is still down nearly 6% from the previous close.
The VIX volatility index, also known as the 'fear index on Wall Street', has dropped by 3% to 16.8 points—any value above 20 indicates heightened volatility in the markets. The VIX was at these levels throughout the first month of the Middle East conflict, but then fell below critical thresholds.
Spot gold surged 3% to $4697 per ounce amid news of a potential agreement between the US and Iran. Silver rose 6% to over $77.
Market chatter
'This window of optimism regarding a peaceful resolution in the Middle East has allowed money to flow back into the stock market,' commented Chris Turner, head of currency strategy at ING Bank NV in London (quote from Bloomberg). 'The driving force,' he added, 'has been the deep conviction of investors that the tech sector will continue to build infrastructure for AI.'
The rise in the stock market shows it 'cannot break free from the euphoria around AI investments,' noted Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research (quote from Reuters). 'The prolonged war and rising gas prices create more serious hurdles for consumer spending; however, as long as there are no clear signs of rising unemployment in the US, the economy remains far from a full-blown recession,' he believes.
According to the ADP employment report released on May 6, the number of jobs in the US private sector increased by 109,000 in April, exceeding the forecast of 99,000.
'Wall Street continues to bet that the Middle East conflict will not escalate into a new situation that disrupts the market's corporate earnings-driven rise to historical highs,' said Kyle Rodda, senior market analyst at Capital.com. 'There is a high risk that if this bet proves wrong, risk assets could plummet,' he added, noting, however, that the signals currently being sent by Washington 'instill confidence that the US is not interested in resuming military actions' in the Middle East (quote from Reuters).