United States stocks pulled back from their record run on Thursday after the Iran-US naval clash in the Strait of Hormuz reintroduced a Middle East risk premium that had quietly drained out of the market over the previous week. The S&P 500 closed at 7,337.11, down half a per cent on the session, with every major sector except utilities lower.
The Dow Jones Industrial Average fell 0.5 per cent to 49,596.97, briefly trading above the 50,000 mark intraday before fading. The Nasdaq Composite ended at 25,806.20. All three indices remained within one per cent of the all-time highs they set on Wednesday on hopes of an imminent US-Iran agreement.
Energy was the day's worst-performing sector, down 1.95 per cent, as oil futures whipsawed on conflicting headlines from Tehran and Washington. ExxonMobil fell 2.3 per cent and ConocoPhillips 2.5 per cent. The industrials sector lost 1.66 per cent on weakness in shipping and logistics names exposed to Gulf trade.
Defence shares were a notable exception, with Lockheed Martin up 1.4 per cent and RTX 1.9 per cent. The S&P 500 aerospace and defence sub-index closed at a record. Apple rose 2.0 per cent on a Wall Street Journal report of a preliminary chip-making agreement with Intel; Intel itself jumped 14 per cent to a fresh all-time high.
Trading volumes were elevated, with NYSE composite volume running roughly 25 per cent above its trailing twenty-day average. The CBOE Volatility Index, which had drifted to a five-month low in late April, rose 14 per cent to settle at 16.4.
Bank of America strategists said the broader uptrend remained intact but warned that a sustained Brent crude price above $105 a barrel would re-tighten financial conditions and could derail the soft-landing thesis. Citi said it was now "neutral" on US large caps from "modestly overweight", citing valuation and the latency of Federal Reserve rate cuts.