US Stocks Rally Pauses as Investors Take Profits Amid Ongoing Iran Diplomatic Efforts

US Stocks End Little Changed Despite Optimism on Middle East Peace Deal

US stocks closed Wednesday's session with minimal movement, as investors took profits in tech names but remained hopeful that an end to the war in the Middle East was near. The S&P 500 Index finished little changed in New York, while the tech-heavy Nasdaq 100 Index dropped 0.1% and the Dow Jones Industrial Average advanced 0.4%.

The volatile trading session was marked by a decline in oil prices, which fell on hopes for a peace deal with Iran. However, the White House dismissed a reported memorandum of understanding between the two countries as a "complete fabrication." US President Donald Trump signaled a willingness to renew strikes on Iran at a cabinet meeting in Washington, D.C.

Despite the choppy trading, Wall Street strategists remain largely bullish on stocks, with the S&P 500 hovering near all-time highs. The exceptional strength of the first-quarter reporting season has prompted several major firms to raise their year-end targets for the S&P 500.

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Goldman Sachs Group Inc. strategists, led by Ben Snider, raised their year-end target for the S&P 500 to 8,000 points from a previous forecast of 7,600. This move follows a similar prediction from Morgan Stanley and Deutsche Bank AG.

The strong earnings season has given forecasters a "real case" to raise their S&P 500 price targets, according to Mark Malek, chief investment officer at Muriel Siebert & Co. However, Malek noted that a higher index does not necessarily mean that everyone is doing fine.

The S&P 500 Information Technology index slipped 0.4% as semiconductor and software stocks fell in tandem. BofA Securities reported that tech stocks led fund outflows last week, resulting in the largest retail outflows since December.

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In contrast, space and rocket companies are advancing, with FTSE Russell adopting a rule change that will speed up the inclusion of large-cap companies, including SpaceX, to its main indexes. Weeks ahead of SpaceX's expected record-breaking initial public offering, this move is seen as a positive development.

US mortgage rates have climbed to their highest level since August, while mortgage applications fell for the week ended May 22. Despite delivering the best quarter for profit growth in more than four years, executives struck a more cautious tone in the face of the US-Iran war, according to Bloomberg Intelligence's earnings call sentiment model.

Investors will closely watch personal income and personal consumption expenditures on Thursday and retail inventories on Friday to gauge the market's direction. Jeffrey O'Connor, head of equity market structure & sales for the Americas at Liquidnet, noted that recent macro data reinforces the view that financial conditions are tightening beneath the surface of an equity market that continues to grind higher.