US equity markets ended Tuesday in mixed territory, with technology shares driving gains on the Nasdaq while the blue-chip Dow Jones Industrial Average slipped into the red.
The Nasdaq Composite rose 277.81 points, or 1.05%, to close at 26,620.72, lifted by a sharp surge in chip stocks that put the index ahead of its peers.
The S&P 500 added 42.65 points, or 0.57%, finishing at 7,516.30, while the Dow Jones Industrial Average shed 173.90 points, or 0.34%, to settle at 50,405.80.
Investor sentiment remained divided as markets weighed the prospect of a US-Iran peace agreement against the risk that fragile ceasefire talks could collapse entirely.
The United States conducted what it described as defensive strikes on Iran, which Tehran condemned as a “gross violation” of the seven-week ceasefire, rattling confidence in ongoing negotiations.
Despite the escalation, both sides signalled continued progress toward an agreement that could end the conflict and reopen shipping lanes through the blockaded Strait of Hormuz.
Sam Stovall, chief investment strategist of CFRA Research in New York, described the market’s fragmented reaction across asset classes as a sign of deep uncertainty among investors.
“WTI is down but Brent is up, gold is down but silver is slightly higher, the Dow is down but the S&P and Nasdaq are up,” Stovall said. “So it’s almost like the asset classes are diversifying by being a little long in one and short in the other, which indicates to me that the market’s not really sure what should happen.”
Stovall added: “If we do get a true agreement between the US and Iran, then I think the market is ready to take off.”
Oil markets reflected the split in sentiment, with US West Texas Intermediate crude falling 2.81% to settle at $93.89 per barrel after no settlement on Monday due to the Memorial Day holiday.
Brent crude moved in the opposite direction, rising 3.58% to settle at $99.58 per barrel, after the US military strikes sent prices spiking following a 7% drop in the previous session.
European markets closed lower as fears grew that the missile strikes could derail peace negotiations and prolong the Strait of Hormuz blockade, stoking inflation concerns across the eurozone.
The pan-European STOXX 600 index fell 0.57%, while Europe’s broad FTSEurofirst 300 index dropped 15.66 points, or 0.62%, by the close of trading.
European Central Bank board member Isabel Schnabel added further pressure on European markets, stating the central bank should raise rates in June regardless of any progress in US-Iran peace talks.
US Treasury yields declined as hopes for a Strait of Hormuz deal helped ease inflation fears, with the benchmark 10-year note yield falling 7.2 basis points to 4.5% from 4.572% on Friday.
The 2-year note yield dropped 7.6 basis points to 4.051%, while the 30-year bond yield slipped 5.2 basis points to 5.0303%, both from their Friday closing levels.
The dollar firmed in the wake of the US strikes, with the dollar index rising 0.14% to 99.18 and the euro slipping 0.14% to $1.1627 against the greenback.
Against the Japanese yen, the dollar strengthened 0.28% to 159.33, while bitcoin fell 1.60% to $75,972.62 and Ethereum declined 1.77% to $2,070.25.
Spot gold fell 1.62% to $4,496.29 an ounce as energy-driven inflation concerns fuelled expectations of further rate increases, weighing on the precious metal’s appeal to investors.
US consumer confidence data released Tuesday showed sentiment darkened slightly in May, with mounting inflation concerns clouding the outlook for spending, which accounts for roughly 70% of the US economy.