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

The S&P 500 closed marginally lower on Thursday, September 24, as investors weighed the recent tensions between the United States and Iran. Microsoft experienced a slight dip, while Meta Platforms saw a rise. The uncertainty surrounding the Middle East drove oil prices higher and lifted Treasury yields. The S&P 500 and Nasdaq rebounded from their lows after Reuters reported that US and Iranian negotiators were discussing a phased approach out of war, which included Iran reopening the Strait of Hormuz and the US lifting its economic sanctions on Iran.

US and Iranian leaders had traded words at the UN General Assembly this week. Brent crude prices surged over 3% to nearly $107 per barrel following a Houthi missile attack on Saudi Arabia, raising concerns about potential supply disruptions. Market analysts noted that the current market situation is primarily driven by oil and inflation, which in turn impact interest rates and subsequently affect the capital markets.

Companies in the AI sector varied in performance, with Microsoft falling 0.5%, Broadcom dropping 1.3%, and Advanced Micro Devices gaining 2.4%. Meta Platforms, however, saw a 4.5% increase, following the announcement of a compact device for its newly launched AI assistant. Oracle's shares slipped 3.5% after it sent a force majeure notice to a data center in New Mexico.

Treasuries, particularly the 30-year bond, climbed to their highest level since 2004, making them comparatively more attractive to investors than riskier stocks. The S&P 500 finished the day at 7,704.13 points, the Nasdaq edged up 0.01% to 26,939.37 points, and the Dow Jones Industrial Average declined 0.31% to 51,349.98 points.

Eight out of the 11 S&P 500 sector indexes fell, with materials leading the drop by 1.18%, followed by a 0.96% decline in consumer staples. This week, the S&P 500 traded just under 19 times expected earnings, marking its lowest valuation since 2023, according to LSEG data. AI-related leaders have contributed significantly to the recent rise in earnings expectations.

US President Donald Trump received Chinese President Xi Jinping at the White House for a summit that was expected to emphasize symbolism over substantial progress on matters such as AI, trade, Taiwan, and the Middle East conflict. Strong business activity data had led to heightened expectations that the Federal Reserve would raise interest rates again following its 25-basis-point increase last week.

Traders now estimate a nearly 70% probability of a rate hike next month, according to the CME FedWatch Tool. New York Fed President John Williams, who holds a voting position on the Federal Open Market Committee, suggested on Thursday that it was plausible for the US central bank to raise rates once more before the end of the year.

MGM Resorts experienced a 11% decline after People, a media mogul led by Barry Diller, withdrew its offer to acquire the casino operator. More stocks declined than rose within the S&P 500, with a ratio of 1.9-to-one. The S&P 500 achieved 14 new highs and 41 new lows, while the Nasdaq recorded 53 new highs and 238 new lows. Trading volume on US exchanges reached 16.8 billion shares, surpassing the average of 16.7 billion shares over the past 20 sessions.