U.S. equity futures traded modestly higher ahead of Friday’s opening bell, indicating that Wall Street could build on the gains recorded in the previous session as markets continue to assess reports of progress in negotiations between the United States and Iran.
Improving expectations that diplomatic efforts could reduce tensions in the Middle East have boosted investor confidence, while falling oil prices have added further support to risk assets.
Oil prices retreat amid ceasefire extension reports
Energy markets moved lower after reports suggested that Washington and Tehran had reached a preliminary framework to extend their current ceasefire arrangement by an additional 60 days.
U.S. crude futures fell 1.4% following the news, which indicated that the proposed agreement could lead to the reopening of the Strait of Hormuz and revive discussions surrounding Iran’s nuclear programme.
However, investors remain cautious as the reported framework still requires approval from President Donald Trump before it can move forward.
Dell earnings spark enthusiasm in technology sector
Technology stocks looked set to provide a positive catalyst after Dell Technologies (NYSE:DELL) surged more than 30% in pre-market trading.
The computer manufacturer exceeded analysts’ expectations with its fiscal first-quarter results and simultaneously increased its outlook for the remainder of the year.
The strong performance reinforced confidence in the technology sector, which has continued to play a central role in driving broader market gains.
Markets await confirmation before taking bigger risks
Despite the constructive tone, traders appeared hesitant to fully embrace risk until there is greater clarity regarding the reported agreement between the United States and Iran.
“Overall, markets are heading into the weekend in a good position as risk appetite has improved as geopolitical fears ease and inflation data avoids a major upside surprise,” said Daniela Hathorn, Senior Market Analyst at Capital.com.
“However, positioning remains optimistic, valuations are elevated and much of the recent rally still relies on assumptions that tensions continue to de-escalate and earnings remain resilient,” she added. “That means investors are likely to remain highly sensitive to both geopolitical headlines and incoming inflation data in the weeks ahead.”
Thursday rally sends major indices to new records
Thursday’s session began on a weak note before stocks staged a powerful recovery later in the day.
The turnaround pushed all three major benchmarks into positive territory, with technology stocks once again leading the advance.
The Nasdaq gained 242.74 points, or 0.9%, to finish at a record 26,917.47. The S&P 500 rose 43.27 points, or 0.6%, to 7,563.63, while the Dow Jones Industrial Average added 24.69 points, or 0.1%, ending at 50,668.97.
Axios report fuels market optimism
The shift in sentiment followed a report from Axios claiming that U.S. and Iranian negotiators had agreed on the outline of a 60-day memorandum of understanding.
According to Axios, which cited two U.S. officials and a regional source familiar with the mediation efforts, the proposal would extend the ceasefire while opening formal negotiations over Iran’s nuclear programme.
The report noted that President Donald Trump has yet to approve the proposal, with one U.S. official indicating that the president wanted additional time to evaluate the arrangement.
Oil volatility highlights fragile geopolitical backdrop
After the Axios report emerged, crude prices retreated from earlier highs, although U.S. oil futures still finished the session modestly higher after surging by as much as 4.3% during trading.
Earlier gains in oil had been driven by reports that the United States launched another round of what it called “self-defense strikes” against targets in southern Iran, prompting Tehran to reportedly target a U.S. air base in response.
“Investors are still broadly positioned for a de-escalation scenario in the Middle East, but recent headlines are a reminder that the path toward any agreement remains fragile,” said Daniela Hathorn, Senior Market Analyst at Capital.com.
Softer inflation data provides additional support
Economic data released on Thursday also helped improve sentiment after inflation figures came in slightly below expectations.
The Commerce Department reported that its Personal Consumption Expenditures (PCE) Price Index increased 0.4% in April, following a 0.7% rise in March. Economists had forecast a 0.5% increase.
On an annual basis, headline PCE inflation accelerated to 3.8% from 3.5%, matching market expectations.
The core PCE index, which excludes food and energy prices, rose 0.2% in April after increasing 0.3% in March. Economists had expected another 0.3% gain.
Annual core inflation edged up to 3.3% from 3.2%, in line with consensus forecasts.
Technology and biotech sectors lead the market higher
Technology shares were among the strongest performers of the day, helping propel the Nasdaq to another record close.
The Dow Jones U.S. Software Index advanced 3.4%, while the NYSE Arca Computer Hardware Index climbed 2.9%.
Biotechnology stocks also posted impressive gains, with the NYSE Arca Biotechnology Index rising 2.6%.
Additional strength was seen across gold-related, pharmaceutical and healthcare stocks, while oil services and utility companies lagged behind as investors rotated into higher-growth areas of the market.
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