U.S. stock futures are pointing to a largely flat open on Wednesday, suggesting markets may struggle for direction early in the session following strong gains over the past two days.
Investors appear cautious after the recent rally, which pushed both the Nasdaq and the S&P 500 to their highest closing levels in more than two months.
Ongoing uncertainty surrounding the conflict in the Middle East is also keeping some traders on the sidelines, as markets await further clarity on a possible new round of peace negotiations between the United States and Iran.
In an interview with Fox Business, President Donald Trump said the war is “very close to over” and repeated his view that Iran is eager to reach an agreement “very badly.”
Trump also forecast that the “stock market is going to boom” once the conflict involving the U.S., Israel and Iran comes to an end.
Despite the recent gains, Russ Mould, investment director at AJ Bell, cautioned that “there remains considerable uncertainty over a successful outcome from peace negotiations.”
Stocks surged on Tuesday, building on Monday’s momentum, with major indices finishing firmly higher, led by strong performance in the technology sector.
By the close, the main indices were at or near their session highs. The Nasdaq jumped 455.35 points, or 2%, to 23,639.08, the S&P 500 gained 81.14 points, or 1.2%, to 6,967.38, and the Dow Jones Industrial Average rose 317.74 points, or 0.7%, to 48,535.99.
The extended rally pushed both the Nasdaq and the S&P 500 to their best closing levels in over two months, while the Dow reached its highest close in a month.
The continued upward momentum was partly driven by optimism around a potential second round of U.S.-Iran talks aimed at ending the Middle East conflict.
President Donald Trump said earlier this week that the U.S. had been contacted by Iran regarding a resumption of negotiations, adding, “They’d like to make a deal very badly.”
In a follow-up interview with the New York Post, Trump suggested that a second round of talks “could be happening over next two days.”
Expectations of renewed diplomacy have contributed to a sharp decline in oil prices, with U.S. crude futures dropping 7%.
“Previously, the narrative was straightforward: the longer the war dragged on, the worse the outlook for growth, inflation and risk assets,” said Daniela Hathorn, Senior Market Analyst at Capital.com. “Now, the dynamic appears to have flipped.”
“With a ceasefire framework still loosely in place and the US attempting to control the Strait, the absence of escalation, rather than the presence of conflict, is being treated as a positive signal,” she added. “In other words, each day without a major disruption to Gulf energy infrastructure is being read as incremental progress toward stabilization.”
Adding to the positive tone, a report from the Labor Department showed that U.S. producer prices rose less than expected in March.
The producer price index for final demand increased 0.5% in March, in line with a downwardly revised figure for February.
Economists had anticipated a 1.2% rise, compared with an initially reported 0.7% increase in the prior month.
On an annual basis, producer prices rose 4.0% in March, up from 3.4% in February, though below expectations of a 4.6% increase.
Airline stocks led sector gains, with the NYSE Arca Airline Index jumping 5.1%.
Brokerage firms also posted solid gains, with the NYSE Arca Broker/Dealer Index rising 2.4%.
Biotech, retail and semiconductor stocks also advanced, while energy stocks declined sharply in line with falling oil prices.