U.S. stock futures moved higher on Friday, indicating that markets could build on Thursday’s powerful rally as investors reacted positively to fresh signs that a diplomatic breakthrough between Washington and Tehran may be approaching.
Sentiment remained supported after President Donald Trump once again suggested that negotiations with Iran were nearing a conclusion.
Reports Indicate Agreement Could Be Near
According to Axios, a proposed memorandum of understanding between the United States and Iran would include the immediate reopening of the Strait of Hormuz without transit fees, alongside sanctions relief for Iran tied to compliance with the agreement.
The report cited both a U.S. official and a diplomat involved in the mediation process. The diplomat said the two sides “have agreed on the text of a deal,” although final approval is still pending.
The framework would reportedly extend the current ceasefire by 60 days, including in Lebanon, while nuclear discussions continue.
Bloomberg separately reported that the agreement could be formally signed during next week’s G7 summit.
Investors Continue to Embrace Positive Headlines
Despite previous setbacks in negotiations, investors appeared willing to respond positively to the latest developments.
“The maxim ‘once bitten, twice shy,’ isn’t being applied by the market when it comes to Donald Trump’s pronouncements, as his latest of several suggestions a deal is close has helped to drive stocks higher once more,” said Dan Coatsworth, head of markets at AJ Bell.
He added, “Whether momentum can be sustained depends on positive noises about a resolution translating into something more solid in the coming days.”
Major Indexes Rebounded Strongly on Thursday
U.S. equities spent much of Thursday trading without a clear direction before staging a sharp afternoon rally.
The major averages recovered from the previous session’s weakness and ended the day with substantial gains.
The Nasdaq climbed 640.16 points, or 2.5%, to finish at 25,809.66. The Dow Jones Industrial Average rose 929.97 points, or 1.9%, to 50,848.75, while the S&P 500 advanced 127.31 points, or 1.8%, to 7,394.30.
Oil Slides After Trump Cancels Planned Military Action
The market rally gathered pace after oil prices tumbled in response to Trump’s decision to call off planned strikes against Iran.
In a Truth Social post, Trump said the move was “based on the fact that discussions with the Islamic Republic of Iran have been brought to the highest level of Iranian leadership and approved.”
The statement represented a dramatic reversal from earlier comments in which he warned that the United States would hit Iran “very hard tonight” and indicated he intended to take control of the country’s oil and gas markets “at some point in the not too distant future.”
Bargain Hunters Return to the Market
The rally was also supported by investors taking advantage of lower valuations following the previous day’s decline.
That weakness had pushed both the Nasdaq and the S&P 500 to their lowest closing levels in a month, encouraging fresh buying interest.
Inflation Report Fails to Dampen Sentiment
Markets largely brushed aside stronger-than-expected producer inflation data released by the Labor Department.
The Producer Price Index for final demand increased 1.1% in May, matching the revised gain seen in April.
Economists had forecast a rise of 0.7%.
On an annual basis, producer price inflation accelerated to 6.5% from 5.7%, marking its highest level since November 2022.
Nevertheless, geopolitical developments and falling energy prices remained the dominant market drivers.
Chipmakers Lead the Charge
Semiconductor companies were among the strongest performers of the session.
The Philadelphia Semiconductor Index surged 7.9%.
Intel (NASDAQ:INTC) jumped 9.2% after Bank of America upgraded the stock from Underperform to Buy.
Airline Stocks Soar as Fuel Costs Ease
Airline shares also benefited from the sharp decline in oil prices, which improved expectations for operating margins.
The NYSE Arca Airline Index climbed 7.5%, making it one of the top-performing industry groups on the day.
Mixed Results Across Sectors
Networking companies, gold miners and computer hardware manufacturers all participated in the rally.
However, energy stocks moved lower alongside crude oil prices, while software companies underperformed despite the broader market strength.
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