US stocks: Dow closes at record high on Iran talks optimism

U.S. stocks kicked off August on a strong note to send the Dow Industrials to a closing record high, as signs of de-escalating U.S.-Iran tensions pulled down oil prices and Treasury yields in a busy week for earnings and economic data. Crude prices settled down about 5% after U.S. President Donald Trump said on Sunday that talks with Iran ‌to reopen the ⁠Strait of Hormuz ⁠would take place on Monday, though Iran disputed that talks were planned. The drop in oil prices helped push U.S. Treasury yields lower, even as market participants continued to gauge the odds of a rate hike from the Federal Reserve should the Iran war continue for a prolonged period.

Communication services was the best performing of the 11 major S&P sectors, climbing more than 4% on gains from Meta Platforms and Alphabet. Energy dropped more than 1% as the worst performer on the session.

"Every day, everybody wakes up and looks at the price of a barrel of oil and the yield on the 10-year, and if that's going lower, the market's OK, and if ⁠it's going ‌higher, the market's not good whatsoever," said Art Hogan, chief market strategist at B. Riley Wealth in Boston.


"Typically earnings are a time that give us a chance to forget about disturbing macro influences, but this go around has not ⁠been one of those times."

ROBUST PROFITS

Earnings have been strong this quarter, showing a 29.3% growth rate from the 304 companies in the S&P 500 that have reported earnings through Friday, according to LSEG data, with 85.2% topping analyst expectations. Amazon shares gained as the company's market cap surpassed $3 trillion for the first time after its earnings results last week. SpaceX, which will report on Tuesday its first quarterly results since going public, also advanced. The stock has been trading below its $135 issue price for nearly three weeks after its debut in mid-June.

Other AI-linked companies reporting this week include Palantir, Advanced Micro Devices as well as data storage companies SanDisk and Western Digital .

According to preliminary data,

Stocks struggled in July partly due to global concerns about the AI trajectory, the U.S.-Iran conflict and the path ⁠of interest rates from the Fed. Bristol Myers Squibb shares were little changed after a report of preliminary merger talks with AstraZeneca. A deal could form one of the world's biggest drugmakers, worth nearly $400 billion. Hotel operator Marriott International slumped after forecasting third-quarter profit below expectations. New York Federal Reserve President John Williams expressed optimism that inflation pressures would ease gradually. A report last week that U.S. Fed Chair Kevin Warsh raised the idea of scheduling fewer rate-setting meetings added to concerns about less clarity around the central bank. Markets are pricing in a 66.5% chance for a rate hike of at least 25 basis points at the Fed's September meeting, according to CME Fedwatch.

Investors will receive several readings on the labor market this week, culminating with the government jobs report on Friday.