By Fred Imbert & Alexandra Gibbs
Stocks rose on Wednesday as energy shares jumped on the back of a strong rally in oil prices. The move higher in stocks and oil follows President Donald Trump’s decision to pull the U.S. out of the Iran nuclear deal.
The Dow Jones industrial average climbed 37 points, with Chevron and Exxon Mobil as the best-performing stocks in the index. The S&P 500gained 0.3 percent as energy rose 1.7 percent. The Nasdaq compositeadvanced 0.1 percent.
“This would have been much more shocking a year ago (when [Brent] oil was US$50) than now (with oil at US$75),” said Hasnain Malik, head of equity research at Exotix Capital, in a note to clients.
“Longer term, this event further narrows the space for countries that would benefit from cooperation with both the US (and its closest regional allies Israel, Saudi and the UAE) and Iran to chart a neutral path, and may portend a weakening of the US-EU strategic relationship,” Malik said.
Following the announcement, countries around the world reacted differently. While some nations in the Middle East commended the move made, U.S. allies in Europe did not. The president of Iran, Hassan Rouhani, said that his country would continue to commit to the nuclear deal, according to Reuters.
Equities closed flat on Tuesday after a choppy trading session. Since late March, stocks have traded in a tight range, with the S&P 500 bouncing between its 50-day and 200-day moving averages, two key technical levels.
“The market had traded up so much late last year and earl y this year,” said Greg Luken, CEO of Luken Investment Analytics. “It takes time to digest that.”
In the bond market, the 10-year Treasury yield reclaimed its position above the 3 percent mark on Wednesday, a level that recently put markets on edge. The two-year note yield also traded at its highest level in nearly a decade.
Meanwhile, in corporate news, shares of Walmart fell 3.2 percent after the company agreed to buy 77 percent of Flipkart for $16 billion. Flipkart is am e-commerce company based in India.