Wall Street retreats slightly amid doubts over Middle East truce

Main indices on Wall Street retreated slightly on Thursday after rising in the previous session, with doubts remaining over the future of the two-week truce in the Middle East, which kept investor risk appetite limited at a time when investors are analyzing inflation data that came in line with expectations. 

U.S. President Donald Trump pledged to keep American military assets in the Middle East until a peace agreement is reached with Iran, warning of a major escalation if Tehran does not comply with the agreement. 

At the same time, Israel bombed more targets in Lebanon, while Iran warned that there would be no agreement if Tel Aviv did not stop its bombing of the country. 

The absence of clear signs of a resumption of ship movements through the Strait of Hormuz also led to increased uncertainty regarding energy shipments, pushing oil prices higher again, despite remaining below the level of $100 per barrel. 

Market sector performance

The energy sector in the S&P 500 index rose by 1.3%, while utility stocks were among the biggest gainers with a rise of 1.6%. 

Charlie Ripley, senior investment strategist at Allianz Investment Management, said: "The move from the brink of continuous escalation with Iran to a more diplomatic approach helped calm markets to some extent." 

By 10:04 AM Eastern Time: 

- The Dow Jones Industrial Average fell by 48.96 points or 0.11% to 47,856.44 

- The S&P 500 decreased by 5.15 points or 0.09% to 6,777.00 

- The Nasdaq Composite retreated by 45.85 points or 0.21% to 22,585.96 

Pressure on technology stocks

Technology stocks were the most influential on the S&P 500 index, as Microsoft shares fell by 1.7% and Apple by 0.7%. 

Software stocks also came under pressure, as the iShares Expanded Tech-Software ETF declined by 3.3%. 

In contrast, consumer discretionary stocks supported gains for Amazon stock, which rose 1.7% after the company's CEO said that AI services in its cloud computing unit are achieving annual revenues exceeding $15 billion. 

The S&P 500 and Nasdaq indices had recorded their largest daily gains in more than a week on Wednesday after global markets welcomed the two-week truce agreement, while the Dow Jones index recorded its largest rise in a year. 

U.S. economic data and interest rate expectations

Data showed that inflation in the United States rose as expected in February, and is likely to rise further in March due to the war with Iran, while economic growth slowed in the fourth quarter more than previously estimated. 

Ripley said that this data "does not change much of the picture for the Federal Reserve, as inflation pressures remain high, which may push it to keep interest rates unchanged at the moment." 

Investors are expected to focus on Consumer Price Index data for March scheduled for release on Friday to see the impact of rising oil prices resulting from the conflict. 

According to data compiled by LSEG, money market participants expect only about a 30% probability of cutting interest rates by 25 basis points by the end of 2026, compared to a 56% probability just one day ago. 

Markets were expecting two interest rate cuts this year before the outbreak of the war, while bets on the possibility of a rate hike in December also rose during the conflict period. 

Company movements

Among the most prominent stock movements: 

- Constellation Brands stock rose by 5% after the maker of Corona beer announced a decline in fourth-quarter sales that was less than expected. 

- Applied Digital stock fell by 7.1% after the data center operator's third-quarter loss widened compared to last year. 

At the market level, declining stocks outnumbered advancing ones by a ratio of 1.15 to 1 on the New York Stock Exchange, and by 1.59 to 1 on the Nasdaq. 

The S&P 500 index recorded 37 stocks at a 52-week high against 16 stocks at a low, while the Nasdaq Composite recorded 64 stocks at an annual high and 84 stocks at an annual low.