US stocks pause record rally as oil climbs on Iran tensions, focus shifts to Big Tech earnings

A record-breaking rally in stocks wavered as oil climbed after efforts to resume peace talks over the Iran war stalled, with traders bracing for a raft of megacap earnings and central bank decisions.

Following an advance that put the S&P 500 on pace for its best month since the depths of the pandemic, the gauge fluctuated. Brent crude topped $108. While a ceasefire has mostly held since early April, shipping blockades have cut daily transits through the Strait of Hormuz to near zero, prolonging the supply disruption that has jolted markets around the world.

Iran’s Foreign Minister Abbas Araghchi told President Vladimir Putin he’s committed to strengthening the country’s partnership with Russia, as talks with the US on ending an eight-week war remain at an impasse.

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His trip comes after Axios reported Tehran has signalled it might accept an interim deal whereby it reopens Hormuz in exchange for Washington ending its blockade of ports. Separately, US Secretary of State Marco Rubio told Fox News he believes Iranian negotiators are “serious” about reaching an accord.

Without much clarity on the geopolitical front, equity traders geared up for results from a handful of technology giants.

Alphabet Inc., Microsoft Corp., Amazon.com Inc. and Meta Platforms Inc. are set to report on Wednesday, followed by Apple Inc. a day later. Those firms are worth nearly $16 trillion combined, representing a quarter of the S&P 500’s market capitalisation.

“With headlines on Iran continuing to provide mixed messages, our sense is that investors will shift their focus toward individual company results,” said Chris Senyek at Wolfe Research. “Along this vein, this week brings a ‘firehose’ of critical market data."

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The Federal Reserve, European Central Bank and peers in Japan, the UK and Canada are all scheduled to set interest rates this week, together deciding monetary policy for about half of the world’s economy.

While investors expect them to leave rates unchanged, markets will be on alert for signs that officials, including Fed Chair Jerome Powell and ECB President Christine Lagarde, are worried about the inflation threat posed by the disruption to oil supply stemming from the war.

“The tone of the press conference will emphasise the prudence of the ongoing wait-and-see stance, although we suspect that investors are nearing the point at which one might expect the Fed to have a stronger conviction take on the fallout from the energy shock – even if that is unlikely to be communicated in its entirety,” said Ian Lyngen at BMO Capital Markets.

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