Oil prices climb back toward US$100, and U.S. stocks halt their record-breaking rally

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NEW YORK — Oil prices rose Wednesday following the latest flare-up in fighting to threaten the U.S.-Iran ceasefire, and U.S. stocks retreated from their records.

The S&P 500 fell 0.7 per cent from its all-time high for its first drop in 10 days. The Dow Jones Industrial Average dropped 620 points, or 1.2 per cent, and the Nasdaq composite sank 0.9 per cent.

Weighing on the market was a climb of 1.9 per cent for the price of a barrel of Brent crude oil, the international standard, which brought it back to US$97.81. It rose after both the United States and Iran said they launched retaliations for earlier attacks or attempted ones.

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Palo Alto Networks helped drag the market lower, and it fell 5.6 per cent even though it reported profit for the latest quarter that topped analysts’ expectations. Investors may have been looking for even more after its stock came into the day with a surge of 61.3 per cent for the year so far, more than quintuple the S&P 500’s already big 11.2 per cent rise.

Stocks also felt pressure from higher yields in the bond market, which climbed with the price of oil. The yield on the 10-year Treasury rose to 4.49 per cent from 4.46 per cent late Tuesday and from just 3.97 per cent before the war began.

High yields worldwide are threatening to slow economies and undercut prices for stocks and all kinds of other investments. They have already forced the average long-term U.S. mortgage rate to its most expensive level in nine months, and they could curtail companies’ borrowing to build the artificial-intelligence data centers that have supported the U.S. economy’s growth recently.

More expensive loans can hurt smaller companies in particular because many need to borrow to grow. The Russell 2000 index of the smallest U.S. stocks fell 1.3 per cent, more than the rest of the market.

Reports released Wednesday on the U.S. economy came in mixed. One from the Institute for Supply Management said growth accelerated more last month for U.S. construction, agricultural and other services businesses than economists expected.

That’s an encouraging signal, but the survey also showed businesses are feeling the pinch of higher prices caused by tariffs and more expensive oil. “This is the definition of inflationary pressure starting to affect us,” one company in the accommodation and food services industry said in the survey.

Still, stocks remain near their records, even with all the pressure on the global economy created by higher inflation.

Oil prices remain below their peaks from earlier in the war with Iran, and hope seems to be remaining on Wall Street that the United States and Iran will ultimately agree to reopen the Strait of Hormuz to oil tankers. That would improve the global flow of crude and hopefully lower its price.

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Such hopes, along with strong profit reports from U.S. companies, helped launch the S&P 500 on its nine-day winning streak that ended Wednesday, one day shy of its longest in three decades.

Medtronic climbed 5.7 per cent after reporting a stronger profit for the latest quarter than analysts expected. It also increased its dividend payout going to investors.

GameStop rose six per cent after the video-game retailer said its revenue in the latest quarter grew 14 per cent from a year earlier. It also announced a program to send up to US$2 billion to its investors by buying back its own stock.

Macy’s added 0.6 per cent after swinging between gains and losses through the day. The retailer reported profit for the latest quarter that blew past analysts’ forecasts, while saying an overhaul of its merchandise and better customer service is resonating with customers.

All told, the S&P 500 fell 56.10 points to 7,553.68. The Dow Jones Industrial Average dropped 620.72 to 50,687.07, and the Nasdaq composite sank 239.93 to 26,853.98.

In stock markets abroad, European indexes fell following a mixed finish in Asia.

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Hong Kong’s Hang Seng dropped 1.6 per cent, but Japan’s Nikkei 225 jumped 2.5 per cent to another record.

Excitement around the boom created by AI technology has been a huge engine for stock markets worldwide. On Wall Street, Marvell Technology rose another 3.7 per cent following its best day on record, a surge of 32.5 per cent, after Nvidia CEO Jensen Huang suggested at a conference in Taiwan that Marvell could be “the next trillion-dollar company.”

The last company to enter the expanding club of behemoths was Micron Technology, which is likewise riding the AI wave.

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Stan Choe, The Associated Press. AP Business Writers Matt Ott and Elaine Kurtenbach contributed.