U.S. stocks closed higher on Wednesday, with the Dow Jones Industrial Average gaining more than 600 points, while the Nasdaq Composite and S&P 500 indexes reached new all-time highs. Investor sentiment was buoyed by easing geopolitical tensions, as expectations grew that progress might be made in U.S.-Iran relations.
The Dow climbed 612.34 points, or 1.24%, to close at 49,910.59. The Nasdaq advanced 512.82 points, or 2.02%, to 25,838.94, and the S&P 500 rose 105.86 points, or 1.46%, to 7,365.08. During the session, the S&P 500 hit an intraday peak of 7,369.22, and the Nasdaq reached 25,850.19, both setting new historic highs.
Market gains were broad-based, with most sectors finishing the trading day in positive territory. Materials stocks led the advancers, while the energy sector underperformed due to a decline in crude oil prices. Oil prices fell following reports that the United States and Iran might be nearing a preliminary agreement, outlining a framework for broader negotiations.
U.S. Treasury yields declined across the board. The yield on the 10-year note fell approximately 6 basis points to around 4.36%, the 2-year yield dropped to about 3.88%, and the 30-year yield edged lower to approximately 4.94%, reflecting some capital movement towards safer assets even as stock market sentiment improved.
According to a report from Axios citing sources, the U.S. and Iran are close to reaching an agreement to resolve conflicts. The reported deal is said to include a suspension of uranium enrichment. An Iranian foreign ministry spokesperson also told media that Tehran is evaluating a proposal from the U.S. to settle disputes.
However, later on Wednesday, the U.S. President suggested that a deal was not certain, stating that the assumption Iran would agree to American proposals "might be a big assumption." In a post on Truth Social, he wrote, "If they don't agree, the bombing will start, and sadly, at a level and intensity much higher than before." He also predicted the Iran issue could be resolved within a week. A Fox News host, citing a phone interview, reported that the U.S. could end its war with Iran within a week, adding that the President was "cautiously optimistic" about the two nations signing a memorandum of understanding. The host stated, "He expects to have everything wrapped up in a week," highlighting the importance of moving highly enriched uranium out of Iran and ensuring the Strait of Hormuz remains fully open.
Previously, on Tuesday evening, the President had announced he would suspend a U.S. program guiding vessels through the Strait of Hormuz, citing "significant progress" towards a comprehensive final agreement with Iranian representatives.
Oil prices fell sharply as traders reduced positions on expectations of a potential end to the conflict. West Texas Intermediate crude futures dropped 5%, trading above $96 per barrel, while the international benchmark Brent crude also declined 5%, trading above $103 per barrel.
Shares of chipmaker AMD surged 18.6% to a record high after the company provided an optimistic second-quarter outlook. AMD's first-quarter revenue and profit also exceeded expectations. The report boosted the entire semiconductor sector, with the VanEck Semiconductor ETF rising 3%. Intel shares gained nearly 2%.
A U.S. equity strategist at RBC Capital Markets commented that the stock market appears to be "climbing a wall of worry." She stated, "I think perhaps people in the geopolitical world don't understand the AI trade and the earnings, and what a buffer that has been for S&P 500 EPS. So, we continue to see positive earnings revisions momentum for AI-related trades. I'm not saying there's a ton of room before we take a bit of a breather, and we don't think the market goes up in a straight line. But I don't think the market is overheated at this point."
On the economic data front, a report from Automatic Data Processing showed that U.S. private sector employment increased by 109,000 jobs in April. This figure significantly exceeded the downwardly revised March reading of 61,000 and also surpassed market expectations of 84,000, marking the largest monthly gain in over a year.
By industry, the service sector remained the primary driver of job growth. The education and health services sector led with an addition of 61,000 jobs, followed by trade, transportation, and utilities, which added 25,000 positions. The construction sector contributed 10,000 new jobs. However, the professional and business services sector lost 8,000 jobs.
Hiring patterns varied by company size, showing strength at both small and large firms but relative weakness in the middle. Small businesses with fewer than 50 employees added 65,000 jobs, while large businesses with over 500 employees added 42,000 jobs. Medium-sized businesses exhibited softer hiring.
The chief economist at ADP noted that large companies have resources to deploy, and small businesses are the most agile, giving both segments important advantages in a complex labor environment.
Regarding wages, annual pay growth for those who remained in their jobs was 4.4% year-over-year, slightly lower than the previous month.
Analysts pointed out that the strong ADP data for April indicates continued resilience in the labor market. This pattern of "low hiring and low firing" provides further justification for the Federal Reserve to maintain the current interest rate level. Market focus has now shifted to the U.S. non-farm payrolls report for April, scheduled for release this Friday.
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