Equities have found support this week on hopes that Washington and Tehran could return to the negotiating table to end the war, which has caused widespread disruption in global oil markets, reignited inflation concerns and muddied the interest-rate outlook.
The resilience suggests that war-weary investors are ready to rotate into risk assets at the slightest indication of a de-escalation in the conflict.
“The market is cautiously optimistic that we can get back to peace with Iran. And thus far, the earnings have been very good,” said Art Hogan, chief market strategist at B. Riley Wealth.
Bank of America shares rose 1.6% after the second-biggest US lender reported growth in its first-quarter profit.
Wall Street heavyweight Morgan Stanley climbed 4.4% after it also reported a jump in first-quarter profit.
So far this week, banks have said US consumers are financially healthy and that pipelines for initial public offerings and deals should remain robust unless the Middle East conflict drags on for much longer.
The S&P 500 financial index gained 0.4%.
At 09.57 am ET, the Dow Jones Industrial Average fell 108.22 points, or 0.22%, to 48,427.77. The S&P 500 gained 7.53 points, or 0.11%, to 6,974.91, while the Nasdaq Composite advanced 100.09 points, or 0.42%, to 23,739.18.
Wall Street’s fear gauge, the CBOE volatility index, dropped 0.68 point to 17.68.
The benchmark S&P 500 index is nearing its first intraday record high since the conflict erupted. The S&P 500 and the tech-heavy Nasdaq have recouped all their losses since the war began.
New catalysts, however, may be needed to sustain the momentum in stocks.
“We’re going to need more concrete evidence now that the folks that want to get together and talk about peace are able to accomplish something before the deadline of this ceasefire,” Hogan said.
The International Monetary Fund cut its outlook for global growth on Tuesday, citing the war-driven energy price spikes, and warned that an extended conflict could push the world to the brink of a recession.
Oil prices were steady on Wednesday, though remaining 31% above pre-war levels.
Seven of the 11 S&P 500 sector indexes posted losses, with materials leading the declines with a 1.2% drop. Consumer staples fell 0.9%.
The S&P 500 information technology index rose 0.8%, as a recent rally in software stocks continued.
Federal Reserve Bank of Cleveland president Beth Hammack said while she sees no imminent need for the central bank to change its interest-rate target setting, it is possible cuts or even hikes could lie ahead.
Among other stock movers, Broadcom advanced 3.6% after Meta extended its custom chips deal with the firm.
Snap rose nearly 7% after it said it would lay off about 1,000 employees, while Allbirds surged more than fourfold following its plan to pivot to AI infrastructure.
Declining issues outnumbered advancers by a 1.26-to-1 ratio on the NYSE and by a 1.14-to-1 ratio on the Nasdaq.
The S&P 500 posted eight new 52-week highs and one new low, while the Nasdaq Composite recorded 51 new highs and 22 new lows.