Middle East Peace Talks Shift Wall Street From Geopolitical Fear To Technical Recovery

The S&P 500 has moved back above its 100-day and 200-day moving averages in two sessions. The CBOE Market Volatility Index, the "fear index," dipped to its lowest point since the onset of the war.

These technical recoveries were driven by signs of ongoing negotiations toward a peaceful resolution to the six-week Middle East conflict, including efforts by Israel to seek talks with Lebanon. The shift in sentiment eased worries over the fragile US-Iran truce.

Wall Street ended higher on Thursday. The Dow Jones Industrial Average rose 275.88 points, or 0.58 per cent, to 48,185.80. The S&P 500 gained 41.85 points, or 0.62 per cent, to 6,824.66. The Nasdaq Composite gained 187.42 points, 0.83 per cent, to 22,822.42.

While geopolitical sentiment lifted the general indexes, specific sector performance diverged. Consumer discretionary stocks registered the biggest percentage gain, bolstered by Amazon.com CEO Andy Jassy stating that AI services at its cloud-computing unit are generating annualized revenue of more than $15 billion. Amazon shares rose 5.6 per cent. Conversely, energy shares dropped the most of the 11 major S&P 500 sectors.

Markets continued to monitor the Strait of Hormuz, through which one-fifth of the world's oil is shipped, as they waited for Iran to reopen it. Front-month WTI futures settled up 3.66 per cent, but remained below $100 per barrel.

Federal Reserve policymakers are increasingly eyeing potential interest rate hikes to counter the inflationary impact of a prolonged Iran war, according to minutes from the most recent monetary meeting. The Commerce Department reported that the economy grew at a slower-than-expected pace in the fourth quarter, while consumer prices remain elevated.