Investors bought the dip with some enthusiasm and a strong bid emerged for AI-focused shares. Gains in energy, tech and defense stocks offset losses in other sectors.
The Dow Jones Industrial Average fell 0.2 percent to 48,904 points, while the S&P 500 gained 0.04 percent to 6,881 and the Nasdaq Composite gained 0.4 percent to 22,748.
Investor confidence in US markets and optimism about productivity gains tied to artificial intelligence, offset worries about surging oil prices and geopolitical turmoil, said Alex Morris, CEO of F/m Investments.
“The overall action in the Middle East does not have a tremendous impact on the average American stock the way we measure,” said Morris, noting the US market’s heavy concentration in technology.
“I just don’t think the average market participant is that moved by the conflict until the price of oil gets to US$100 a barrel, which would be an emotional trigger.”
Coordinated US and Israeli strikes on Iran over the weekend killed Tehran’s Supreme Leader Ayatollah Ali Khamenei, and sent shockwaves through global markets.
Oil prices jumped and most overseas stock indexes closed lower. Bargain hunting emerged among US investors after the early selloff, showing an expectation that the disruptions from the conflict will be limited.
“Market participants think this is all just temporary and that the problems in the oil patch will disappear,” said Bill Smead, founder and chairman of Smead Capital Management.
The clash initially boosted defense shares and energy prices and pressured travel and interest-sensitive sectors. Later, investors ran to tech and weighed how long the Middle East conflict could run and what the conflict means for inflation and Federal Reserve policy.
Smead said investors were reverting to familiar, high-performing stocks like Nvidia, the Magnificent Seven technology stocks and defense sectors.
“When people get scared, they go back to what is comfortable,” he said.
Nvidia gained 3 percent and Microsoft climbed 1.5 percent, recovering from sharp declines last month. The gains helped the S&P 500 and Nasdaq cut losses after both briefly hit two-week lows earlier in the session.
Energy companies, whose profits rise alongside oil prices, outperformed, while travel and airline stocks sank due to flight cancellations, higher jet-fuel costs and widespread Middle East airspace closures.
Delta and United Airlines fell more than 2 percent each, while crude-price-sensitive cruise stocks such as Carnival lost 7.6 percent and Norwegian Cruise fell over 10 percent.
Several oil and gas facilities in the Middle East stopped production. US crude prices settled up 6 percent at US$71.23 a barrel after being up twice as much during the session. Brent settled at US$77.74 per barrel, up 6.7 percent. (Reuters)
Edited by Cecil Wong
