Wall St advances as Iran deal optimism offsets hawkish Fed; Intel soars

By Twesha Dikshit and Joel Jose

June 18 (Reuters) – U.S. stocks rebounded on Thursday with semiconductor shares leading gains as optimism about a Middle East peace deal offset worries about a hawkish Federal Reserve under new Chair Kevin Warsh.

Intel’s shares jumped almost 10% after U.S. President Donald Trump said Apple had agreed to work with the company to design and manufacture its chips in the United States.

Other chip stocks also moved higher. Nvidia rose 1.1%, while Micron and Marvell Technology added over 5% each.

The Philadelphia SE Semiconductor index hit a record high and was last up 4.6%, while the S&P 500 tech index rose 1.6%. All three major indexes sank in the previous session as investors priced in the likelihood of more Federal Reserve rate hikes, after Warsh underscored the need to curb inflation and other policymakers signaled higher borrowing costs ahead.

Meanwhile, the United States and Iran released the text of a signed interim agreement that extends the April ceasefire by another 60 days to allow the two sides to reach a final deal. It’s the U.S.-Iran deal signing that “seems to be usurping any negative sentiment brought about by a more hawkish Fed yesterday,” said Art Hogan, chief market strategist at B Riley Wealth.

“Energy prices continue to trade lower. The potential for an end to the war in Iran would certainly be a significant positive and might even help bring down inflation over the long term.”Markets are currently pricing in a 50% chance of a 25-basis-point rate hike in September, according to CME Group’s FedWatch tool, higher than 27% priced in on Wednesday.

Eight out of 11 major S&P 500 sectors moved higher with industrials gaining 1.6%.

At 09:36 a.m. ET, the Dow Jones Industrial Average rose 357.37 points, or 0.70%, to 51,853.59, the S&P 500 gained 62.05 points, or 0.84%, to 7,482.15 and the Nasdaq Composite gained 225.57 points, or 0.87%, to 26,247.23.

The small-cap Russell 2000 index rose 1.4%. Oil prices slid to a more than three-month low, keeping alive hopes that inflation could be tamed without hiking interest rates.

Markets have regained ground from a slump in early June, with a resilient economy, a broadening rally beyond tech shares and optimism surrounding a U.S.-Iran deal boosting sentiment.

All three indexes were on track to end higher for a second consecutive week before Friday’s Juneteenth holiday.

On the data front, Labor Department data showed the number of Americans filing claims for unemployment benefits fell last week as layoffs remained low.Thursday also marks the once-in-a-quarter simultaneous expiry of derivatives contracts tied to stocks, index options and futures, also known as “triple witching”, which can boost trading volume and aggravate volatility.

Among other movers, Kroger dropped 6.4% after the grocer reported a lower-than-expected profit for the first quarter and kept its annual forecasts unchanged.

Shares of Accenture tumbled almost 16% after the company trimmed the top end of its annual revenue forecast. Peers Cognizant Technology Solutions and IBM dipped 8.2% and 6.5%, respectively.

Advancing issues outnumbered decliners by a 2.48-to-1 ratio on the NYSE and by a 2.48-to-1 ratio on the Nasdaq.

The S&P 500 posted 21 new 52-week highs and 19 new lows while the Nasdaq Composite recorded 53 new highs and 52 new lows.

(Reporting by Twesha Dikshit and Joel Jose; Editing by Pooja Desai and Devika Syamnath)