Asian shares turned hesitant on Thursday as news of a fresh US military strike in Iran challenged investor optimism on a near-term peace deal, with MSCI's broadest index of Asia-Pacific shares outside Japan dipping 0.1%. Japan's Nikkei eased 0.2% while South Korean shares went flat, as the strike added to conflicting signals over the talks after President Donald Trump dismissed an Iranian report of a deal to restore traffic through the Strait of Hormuz. Oil prices bounced 2% and Treasury yields edged higher as the strike kept upward pressure on inflation expectations. According to Business Standard, Madison Cartwright, a senior geo-economics analyst at CBA, put a 70% probability on a deal being agreed, while cautioning that the fate of the strait remained uncertain.
The Dow Jones Industrial Average achieved a record closing high, rising about 200 points to notch another record close, while the S&P 500 gained less than 0.1% to close at 7,520.36 and the Nasdaq Composite rose less than 0.1% to 26,674.74. According to Reuters, all three major indexes reached record closing levels despite showing little conviction, with a pullback in chip stocks capping their gains. The mixed performance reflects a pause in the AI-led market rally as investors take a cautious approach, while markets are closely watching developments in US-Iran peace negotiations that could impact energy prices and inflation expectations. Oil prices plunged more than 5% on Wednesday after Secretary of State Marco Rubio said that Washington was giving Iran talks "every chance to succeed," though markets later recovered as new developments emerged.
Banking stocks declined following JPMorgan Chase's warning that expenses this year could be $1 billion higher than estimated, with CEO Jamie Dimon's comments weighing on the sector. According to The Economic Times, chip stocks also faced pressure after reaching record highs, with the iShares Semiconductor ETF (SOXX) slipping more than 1% during Wednesday's session. Qualcomm (QCOM) fell more than 6% and AI chip designer Marvell Technology (MRVL) declined 4.6% ahead of its quarterly results after the closing bell. The Philadelphia SE Semiconductor index lost ground after hitting a record high on Tuesday. Memory giant Micron (MU) still extended its gains a day after topping a $1 trillion market capitalization for the first time, though the broader chip sector came under pressure. Zscaler tumbled after the cloud security firm projected fourth-quarter revenue below expectations, while GlobalFoundries fell following reports that majority owner Mubadala Investment Company was seeking to raise $1.91 billion from an unregistered block sale.
Snowflake shares rocketed as much as 36% after the cloud-based AI and data platform company reported a strong earnings beat and announced plans to spend $6 billion on Amazon Web Services cloud infrastructure, signaling aggressive investment to meet surging AI-driven demand. Salesforce also posted quarterly results that topped Wall Street expectations, though its full-year guidance came in slightly below forecasts. Dell Technologies secured a massive $9.7 billion Pentagon software deal, underscoring its growing ties with the Trump administration. The S&P 500 energy index declined tracking the 5% drop in oil prices, while consumer discretionary stocks led gains among the sub-sectors. Bath & Body Works jumped after reporting first-quarter sales and profit above expectations, while Abercrombie & Fitch advanced on posting a strong quarterly profit. Earnings season continues this week, with Marvell Technology (MRVL), Salesforce (CRM), and Snowflake (SNOW) set to report after the closing bell on Wednesday.
Financial markets are currently pricing in a 50-50 chance of a quarter-point rise in the funds rate to a range of 3.75-4.0% by year-end, with markets implying a 38.1% likelihood that the U.S. Federal Reserve will raise interest rates in December. The focus now shifts to US data on personal consumption expenditures (PCE), which include the Federal Reserve's preferred measures of inflation. The pulse from fuel is expected to lift the headline PCE to a three-year high of 3.8%, while the core is forecast to rise 0.3% to an annual 3.3% and far above the Fed's 2% target. Investors are now turning their attention to a key April inflation reading due out at 8:30 a.m. ET on Thursday, which could shape expectations for future rate cuts. Any signs of cooling price pressures would likely be welcomed by markets. The shift in Fed expectations has helped underpin the US dollar, which was trading at 99.291 against a basket of currencies to be steady on the week, with the dollar creeping to a four-week top on the yen at 159.57.
