US Stock Market Falters on 2-Day Rally Hopes

US Stock Futures Signal Third Straight Positive Start for Wall Street

On Friday, May 22, US stock futures indicated a third consecutive positive opening for Wall Street, amidst hopes of a potential US-Iran peace deal and a rebound in the AI trade. The futures tied to the benchmark S&P 500 rose by 0.2%, while Dow Jones Industrial Average futures gained 124 points, or 0.25%. Nasdaq 100 futures also increased by 0.27%.

The S&P 500 fluctuated widely throughout the week as investors navigated a sharp rise in long-term Treasury yields and volatile crude oil prices. However, the index remained on track for an eighth straight weekly gain, up 0.50% for the week, shrugging off concerns about severe disruptions to energy flows that could stoke inflation. If the index closes the week higher, it would mark its longest winning streak since 2023.

The prospects for a US-Iran peace deal remain uncertain, with conflicting reports and statements from both sides. US Secretary of State Marco Rubio reportedly noted "some encouraging signs" surrounding a possible deal with Iran, while Pakistani mediators are expected to visit Tehran to review Washington's latest proposal. Meanwhile, Iran is reportedly discussing with Oman the possibility of setting up a permanent toll system that would formalize its control over maritime traffic through the energy chokepoint.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Key Developments in the US-Iran Peace Talks

In the bond market, the yield on the 10-year US Treasury note steadied around 4.57%, setting the tone for borrowing costs across global markets. Crude oil prices remained higher, with Brent crude, the international oil benchmark, surging another $4 to the day's high of $106 per barrel. However, Brent had ended last week with an 8% jump and is now up nearly 73% so far this year.

The correlation between oil prices and stock markets has also turned positive in recent weeks, meaning the two asset classes are now more likely to move in tandem rather than in opposite directions. US stocks in focus today include megacap and growth stocks, which traded mixed in premarket trading. Nvidia inched up 0.2%, a day after the stock fell 1.7% despite delivering a robust quarterly forecast. Semiconductor stocks also traded with modest gains, with Advanced Micro Devices, Marvell Technology, and Broadcom advancing between 0.3% and 1.7%.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Better-than-expected first-quarter performance pushed Workday shares up more than 9% in pre-market trade, while Estée Lauder surged 9.8% after the cosmetics maker and Spanish perfumery company Puig ended talks over a potential merger. Take-Two Interactive added 4.3% after the video game company reiterated the November 19 launch date for the highly anticipated Grand Theft Auto VI, according to Reuters.