S&P 500 and Dow Rise as Iran Deal Boosts Markets Before Fed Rate Decision

TLDR

• The Dow Jones crossed 52,000 points for the first time on Tuesday, driven by optimism around a U.S.-Iran peace deal.
• The U.S. would allow Iran to immediately resume oil sales under the proposed deal, pushing crude prices lower.
• The Federal Reserve is expected to hold interest rates steady, with new Chair Kevin Warsh set to hold his first press conference.
• Investors are watching Warsh’s tone closely for clues about future rate moves, as hot inflation and a steady jobs market have ruled out rate cuts.
• Bitcoin fell 1.3% over 24 hours to $64,469, reflecting caution ahead of the Fed announcement.

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U.S. stocks climbed in premarket trading on Wednesday, building on Tuesday’s record-breaking session for the Dow Jones Industrial Average as hopes grew that the U.S. and Iran are close to formally ending their conflict.

The Dow crossed the 52,000-point mark for the first time ever on Tuesday. On Wednesday morning, Dow futures were up around 50 points, or 0.1%. S&P 500 futures added 0.3%, and Nasdaq 100 futures gained 0.8%, led by tech stocks.

E-Mini S&P 500 Jun 26 (ES=F)

The other two major indexes — the S&P 500 and Nasdaq — had dipped on Tuesday as Wall Street rotated out of tech and into lagging sectors.

The Wall Street Journal reported that the U.S. would allow Iran to immediately begin selling oil and fuel as part of the peace deal. The two sides are working toward formally signing the agreement on Friday.

Oil prices fell on the news. Brent crude futures slid 0.7% to $78.43 a barrel, while West Texas Intermediate dropped 1.1% to $75.25 a barrel.

Fed’s First Decision Under New Chair Kevin Warsh

The Federal Reserve is set to announce its latest interest rate decision at 2 p.m. Eastern time. Markets are widely pricing in no change to rates.

But investors are paying close attention to Warsh’s first press conference as Fed chair. The goal is to get a sense of his communication style and where he stands on future rate moves.

Warsh has taken over the role at a complicated time. Hot inflation data, partly tied to the conflict with Iran, combined with a solid labor market, has removed rate cuts from the near-term picture. There is also a question of whether rate hikes could return if price pressures don’t ease.

Demmert added that any market volatility from Warsh’s comments on Wednesday should be treated as a buying opportunity, saying that “market fundamentals remain in place.”

Bitcoin Pulls Back Ahead of Fed Announcement

Bitcoin dropped 1.3% over the past 24 hours to $64,469, reflecting the cautious mood in markets before the Fed decision.

The yield on the 10-year U.S. Treasury note slipped 1 basis point to 4.44%. The U.S. dollar traded flat against a basket of major currencies.

Investors are also keeping an eye on developments in the Strait of Hormuz, where oil flows have been disrupted by the conflict. The peace deal raises hopes that shipping could resume, which would ease some pressure on global energy markets.

The U.S. and Iran are aiming to sign the 14-point memorandum of agreement formally on Friday, following the leak of the deal’s text on Tuesday evening.

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