Nasdaq and S&P 500 Retreat as Dow Defies Market Weakness
US stocks traded unevenly on Monday as investors searched for direction following renewed volatility linked to developments in the Middle East.
Iran reported progress in peace negotiations held in Switzerland. However, traders remained cautious after geopolitical tensions increased over the weekend.
By 10:36 a.m. ET, or 2:36 p.m. GMT, the S&P 500 had fallen 0.2% to 7,487.77 points.
The technology-heavy Nasdaq Composite declined 0.8% to 26,309.54 points. In contrast, the Dow Jones Industrial Average gained 0.2% to reach 51,687.93 points.
US Stock Futures Recover From Early Losses
US stock futures initially fell by as much as 1% as investors reacted to fears of renewed military escalation involving Iran.
President Donald Trump threatened further strikes against the country unless Tehran acted to limit Hezbollah’s activities in Lebanon.
The warning increased concerns that fighting between Israel and Hezbollah could disrupt diplomatic efforts and destabilize the wider region.
However, markets recovered part of their earlier losses after Iranian officials and international mediators reported encouraging progress in the peace talks.
US markets had been closed on Friday for the Juneteenth holiday.
Iran Reports Progress in Switzerland Peace Talks
Iranian Foreign Minister Abbas Araghchi said negotiators had achieved major progress during discussions in Switzerland.
According to Araghchi, the talks made particular headway toward finding a solution to the conflict in Lebanon.
Officials from Pakistan and Qatar, which are mediating the negotiations, also described the discussions as encouraging.
Both the United States and Iran reportedly agreed to hold further technical talks in the coming days.
These developments helped ease some of the immediate concerns surrounding the Middle East conflict.
Trump Threatens Additional Strikes Against Iran
The positive diplomatic comments followed a warning from Trump on Sunday.
The US president threatened to attack Iran again unless it stopped Hezbollah from causing further instability in Lebanon.
Iran supports Hezbollah, which has been involved in an intense conflict with Israel in southern Lebanon.
The group’s role has become one of the main obstacles in negotiations aimed at securing a broader peace agreement.
As a result, investors remained cautious despite the reported diplomatic progress.
Technology Stocks Recently Lifted Wall Street
Wall Street ended the previous trading session higher during a holiday-shortened week.
Chipmakers rallied as investors maintained their enthusiasm for artificial intelligence and welcomed the initial framework agreement between the United States and Iran.
The S&P 500 gained 0.6% on Thursday, while the Nasdaq advanced 1.9%. The Dow added 0.1%.
All three major indexes finished close to their recent record highs.
Artificial Intelligence Boom Supports Equity Markets
Investors continue to use large technology companies as a primary way to gain exposure to the long-term expansion of artificial intelligence.
Strong demand for AI-related stocks has repeatedly pushed major US indexes toward historic highs.
The technology rally, combined with several major initial public offerings, has helped Wall Street withstand periods of geopolitical uncertainty.
However, the Nasdaq’s decline on Monday showed that technology shares remain vulnerable when investors become more cautious about risk.
US Economic Data Moves Into Focus
Investors are preparing for several important reports on the US economy.
Purchasing managers’ index data will provide new information about activity across the manufacturing and services sectors.
Markets will also assess a revised estimate of first-quarter US gross domestic product.
These figures could influence expectations for economic growth and future Federal Reserve policy.
Higher-for-Longer Rates Pressure Markets
Wall Street’s recent volatility also reflects changing expectations surrounding US interest rates.
Federal Reserve officials have continued to signal that borrowing costs may remain elevated for an extended period.
This higher-for-longer outlook has reduced expectations for near-term monetary easing and created pressure on interest-rate-sensitive stocks.
Technology companies can be particularly vulnerable to higher rates because much of their valuation depends on expected future earnings.
Investors Await PCE Inflation Report
The Personal Consumption Expenditures price index will be one of the most closely watched economic releases of the week.
The PCE index is the Federal Reserve’s preferred measure of inflation. Therefore, it could provide an important signal about the central bank’s next policy decision.
A weaker-than-expected reading could ease concerns about persistent inflation and reduce expectations for further rate increases.
However, a stronger inflation report could reinforce speculation that the Federal Reserve will tighten policy again.
Until investors receive clearer signals from economic data and the US-Iran negotiations, trading across Wall Street may remain volatile.
