Dow hits record high as oil slides; SpaceX soars
By Sruthi Shankar and Twesha Dikshit
June 16 (Reuters) – The Dow Jones Industrial Average touched an intraday record high on Tuesday as oil prices slid further on optimism around a U.S.-Iran peace deal, while SpaceX surpassed Amazon’s market value to become the fifth-most valuable U.S. firm.
Shares of SpaceX climbed more than 10%, helping the AI and rocket giant surpass Amazon’s market value and even briefly top Microsoft as its blistering post-IPO rally continued.
Broadly, investors were rotating into economically sensitive sectors such as financials and industrials, while dumping technology stocks, after news of a preliminary deal to end the Middle East conflict eased concerns about inflation and any dent to economic growth.
The S&P 500 technology index fell 1.5%, while financials rose 1.6%.
Shares of JPMorgan Chase climbed 3.7%, while Bank of America added 2%.
The U.S.-Iran interim deal would extend a tenuous ceasefire announced in April by another 60 days and reopen the Strait of Hormuz, which Iran has effectively blocked since the U.S. and Israel attacked Iran in February.
Oil prices slumped more than 5% despite doubts about the deal as shippers said it could take weeks for confidence to return after any reopening of the Strait of Hormuz.
A surge in energy prices has raised concerns that major central banks could raise interest rates to tame inflation.
Investors widely expect the Federal Reserve to hold interest rates at the 3.50-3.75% range on Wednesday, though they will pay close attention to new Fed Chairman Kevin Warsh’s comments on inflation, unemployment and the economic outlook.
“You have the Fed tomorrow coming out. No one’s really expecting much, but with the new Fed chair, people have overestimated the potential for a rate hike,” said Joe Saluzzi, co-head of equity trading at Themis Trading.
“What they might find is that this Fed chair is probably going to stay still and not raise rates. So that would be very beneficial for some sectors of the market.”
At 11:58 a.m. ET, the Dow Jones Industrial Average rose 445.50 points, or 0.87%, to 52,115.23. The S&P 500 lost 13.31 points, or 0.17%, to 7,541.38 and the Nasdaq Composite lost 134.95 points, or 0.51%, to 26,548.74.
Inflation, in particular, is stuck more than a percentage point above the Fed’s 2% target, and Warsh’s characterization of whether and when it is likely to fall will be a key first step in the evolution of monetary policy under his leadership.
Traders see the Fed holding rates through much of the year while placing a 42% chance of a 25-basis-point rate hike in December, as per CME Group’s FedWatch tool.
