S&P 500 ends marginally lower as investors focus on US-Iran war

The S&P 500 closed slightly lower on Thursday as investors pondered the potential consequences of a US-Iran war. The index experienced a modest decline after reports emerged of negotiations between the US and Iranian representatives exploring a phased approach to de-escalation. This development prompted a spike in oil prices and Treasury yields, contributing to the market's cautious sentiment.

Tech giants like Meta Platforms and Microsoft saw mixed results, with Meta's shares climbing 4.5% following the unveiling of an AI-powered handheld device. However, Microsoft and Broadcom experienced declines of 0.5% and 1.3%, respectively. Meanwhile, Advanced Micro Devices managed to gain 2.4%.

Investors' focus on oil prices and inflation underscored the market's concern over potential interest rate hikes. Treasury yields rose, with the 30-year bond yield hitting its highest level since 2004. This situation makes safe-haven Treasuries more appealing to investors compared to stocks with uncertain returns.

The S&P 500 finished the day at 7,704.13 points, a 0.02% decrease, while the Nasdaq edged up by 0.01% to 26,939.37 points. The Dow Jones Industrial Average slipped by 0.31% to 51,349.98 points. Eight of the 11 S&P 500 sector indexes fell, led lower by materials and consumer staples.

The S&P 500 this week has traded at a valuation of just under 19 times expected earnings, marking its lowest level since 2023. The heightened expectations for Federal Reserve interest rate hikes, coupled with strong business activity data, have fueled investor optimism. Traders now estimate a 70% probability of a rate increase next month, as per the CME FedWatch Tool.