US Stocks Close Higher as Reports Emerge of Extended US-Iran Truce

U.S. Stocks Rally to Record Highs as Iran-U.S. Ceasefire Agreement Eases Geopolitical Tensions

New York, May 28 - U.S. stocks advanced on Thursday, with the S&P 500 and the Nasdaq registering their third consecutive sessions of record closing highs. European shares, however, pared their losses following reports that the United States and Iran have reached an agreement to extend the ceasefire and launch negotiations.

According to sources familiar with the matter, the United States and Iran have agreed to a memorandum of understanding that extends the truce for another 60 days to allow for negotiations. However, the agreement still needs the approval of U.S. President Donald Trump, and comes after Iran targeted a U.S. air base in Kuwait and the United States struck what it described as an Iranian drone complex near the Strait of Hormuz.

Despite the ongoing geopolitical tensions, market experts point to a strong intersection of fundamentals and market signals, indicating that growth is strong and growth-oriented assets continue to perform. In fact, a raft of economic data showed first-quarter U.S. GDP grew at a more sluggish pace than originally reported, but the saving rate sank to its lowest level since June 2022, and inflation continued to heat up.

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

The combination of weak GDP and rising price growth presents the U.S. Federal Reserve with a dilemma regarding the central bank's monetary policy. "What the numbers point to today is simply that we have a stagflation problem, and that's a big problem for the Fed," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

The Dow Jones Industrial Average rose 25.49 points, or 0.05%, to 50,669.77, while the S&P 500 rose 43.42 points, or 0.58%, to 7,563.78. The Nasdaq Composite rose 242.74 points, or 0.91%, to 26,917.47. European shares, however, dropped as U.S.-Iran developments kept risk appetite low, but pared steeper losses.

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

Oil prices were split, with U.S. WTI edging higher, while Brent dipped due to its vulnerability to Strait of Hormuz traffic disruptions. U.S. crude rose 0.25% to settle at $88.90 per barrel, while Brent settled at $93.71 per barrel, down 0.62% on the day.

U.S. Treasury yields turned lower following the weaker-than-expected U.S. economic data and news of the potential interim deal in the Iran war. The yield on benchmark U.S. 10-year notes fell 2.8 basis points to 4.453%, from 4.481% late on Wednesday.

The dollar edged lower in the wake of the largely disappointing economic data and the developments relating to the Iran war. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.27% to 99.02, with the euro up 0.19% at $1.1646. Against the Japanese yen, the dollar weakened 0.18% to 159.23.

In cryptocurrencies, bitcoin fell 2.47% to $73,306.56, while Ethereum declined 2.35% to $2,011.65. Gold prices reversed earlier losses, with spot gold rising 0.9% to $4,497.35 an ounce. U.S. gold futures rose 1.04% to $4,494.60 an ounce.