Wall Street rallies to the edge of its all-time high as oil prices ease

Federico DeMarco, right, and Dilip Patel work on the floor at the New York Stock Exchange in New York. (AP Photo/Seth Wenig)

NEW YORK (AP) — U.S. stocks rallied to the edge of an all-time high Tuesday, and oil prices eased as hopes climbed  that the United States and Iran may try again on talks to end their war and avoid a worst-case scenario for the global economy.

The S&P 500 added 1.2 per cent to its leap from the day before, and the index at the heart of many 401(k) accounts is just 0.2 per cent below its record set in January.

The Dow Jones Industrial Average rose 317 points, or 0.7 per cent, and the Nasdaq composite climbed 2 per cent. They followed gains for stock markets worldwide as diplomats worked through back channels to arrange a new round of talks between the United States and Iran.

If talks succeed and the war ends up being only a temporary setback for the global economy, rather than a new normal of very high oil prices and inflation, investors can turn their attention back to what matters most for stock prices: How much money are companies making?

Positive trends there had stock markets worldwide doing well before the war began, and analysts see continued growth ahead, for now at least.

Lower oil prices help bring down costs for all kinds of businesses, and the price for a barrel of Brent crude to be delivered in June fell 4.6 per cent to settle at US$94.79 Tuesday.

While that’s still above its roughly US$70 price from before the war began in late February, it’s well below the US$119 peak it has hit when worries about the war have been at their heights.

To be sure, hope has often swung quickly into doubt since the war began, which has caused extreme and sudden reversals in financial markets. Much of the stress has been due to the Strait of Hormuz, a narrow waterway that’s the main avenue for crude oil produced in the Persian Gulf area to reach customers worldwide. Blockages there have kept oil off the global market, which has in turn driven up its price.

And that has meant a blast of higher inflation. In the United States, inflation at the wholesale level accelerated to 4 per cent in March  from 3.4 per cent the month before, according to the latest data released Tuesday. That was actually better than the 4.6 per cent rate economists expected.

The effect is worldwide. Global inflation this year looks set to accelerate to 4.4 per cent  from 4.1 per cent in 2025, according to the International Monetary Fund, which had earlier thought inflation would slow to 3.8 per cent.

The IMF on Tuesday also downgraded its forecast for global economic growth to 3.1 per cent this year from the 3.3 per cent it had forecast in January.

On Wall Street, strong profit reports from companies are helping to make up for such worries. Over the long term, stock prices tend to follow the path of corporate profits, and analysts are forecasting S&P 500 companies will report solid growth of more than 12 per cent for the most recent quarter, according to FactSet.

Optimism remains high enough that analysts have raised their estimates since the war began for S&P 500 profits over the first six months of the year, according to strategists at Morgan Stanley.

BlackRock gained 3 per cent, and Citigroup rose 2.6 per cent Tuesday after the financial companies reported stronger profit and revenue for the latest quarter than analysts expected.

JPMorgan Chase likewise delivered a better-than-expected quarter, but its stock dipped 0.8 per cent as CEO Jamie Dimon said bank officials cannot predict how the “increasingly complex set of risks” will play out given so much uncertainty.

Amazon climbed 3.8 per cent after saying it would buy Globalstar, a mobile satellite services company, for US$90 per share in either cash or Amazon stock. Globalstar jumped 9.6 per cent.

Software companies also rallied for a second day, recovering more of their sharp losses from earlier in the year on worries they could be made obsolete by artificial-intelligence technology. AppLovin rose 3.9 per cent, and an ETF from iShares tracking the software industry added 1 per cent.

That in turn helped private-credit companies recover. These companies have lent money to software businesses and others that may be under threat from AI, and some have seen a rush of investors trying to pull out their money.

Blue Owl Capital rose 8.5 per cent to trim its loss for the year so far below 39 per cent. Ares Management climbed 5.6 per cent, and Apollo Global Management rose 4.4 per cent.

They helped offset a 5.7 per cent drop for Wells Fargo, which reported weaker revenue for the latest quarter than analysts expected.

All told, the S&P 500 rose 81.14 points to 6,967.38. The Dow Jones Industrial Average gained 317.74 to 48,535.99, and the Nasdaq composite climbed 455.35 to 23,639.08.

In stock markets abroad, indexes rose across much of Europe and Asia. South Korea’s Kospi jumped 2.7 per cent, and Japan’s Nikkei 225 rose 2.4 per cent for two of the bigger gains.

In the bond market, Treasury yields eased as the fall for oil prices took some of the pressure off inflation. The yield on the 10-year Treasury fell to 4.25 per cent from 4.30 per cent late Monday.

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Stan Choe, The Associated Press. AP Business Writers Chan Ho-him and Matt Ott contributed to this report