Dow Jones and S&P 500: US Stocks Mixed as Oil Surge Rattles Indices Forecast

Stocks Finish Mixed but Pull Back From the Worst Levels

The major U.S. stock indexes finished Thursday with a mixed tone, but the session told an even bigger story about uncertainty heading into today’s Good Friday break. Stocks opened sharply lower after President Trump signaled tougher action against Iran the night before, which drove oil prices higher and rattled investors early in the session. However, shortly after the weak cash market opening, the indexes began to climb.

As the day went on, those early losses eased after signs of diplomacy helped calm fears about a longer war between the U.S. and Iran. By the end of the volatile session, the blue chip Dow Jones Industrial Average was off by only 0.13%, while the benchmark S&P 500 Index posted a 0.11% gain and the tech-heavy Nasdaq Composite closed 0.18% higher.

Deferred Oil Contracts Told a Different Story

The main pressure came from a sudden jump in oil prices tied to escalating Middle East tensions. U.S. benchmark WTI crude surged about 11% to around $111 per barrel, while international benchmark Brent crude climbed near $108. Now with those kind of moves, investors expressed concerns about higher costs for business and consumers.

However, for some reason, investor focus shifted away from the nearby cash market to the deferred futures contracts. October WTI, for example, was priced closer to $75 for October. This helped to calm fears, in my opinion, because it signaled that the markets expect the disruption to be temporary rather than long-lasting.

Iran and Oman Working on the Strait Changed the Narrative

Additionally, sentiment improved throughout the session after Iran signaled it was working with Oman to manage traffic through the Strait of Hormuz, an important route for 20% of global oil shipments. That move surprised me because I had been primarily focused on the war and not the reopening of the Strait. It looks like the world is treating the war and the reopening of the Strait of Hormuz as separate events.

Is International Pressure Starting to Push Back on Trump?

There were also reports that Britain said multiple countries were discussing ways to reduce the tensions in the region. Does this mean that Trump is losing support for the war? Are global leaders saying, “enough is enough”? Will Trump cave in to international pressures? These are questions investors are considering at this time. While a major change to Trump’s plans wasn’t apparent, peace negotiations were still taking place. All of these events may have contributed to the market’s midday recovery from their worst levels, but conviction looked weak. However, the VIX dipped to 23.87, which did indicate some stress was being relieved.

Technical Outlook

Technically, the Dow Jones Industrial Average is in a downtrend. The trend will change to up if the market can regain the 200-day moving average at 46717.01. Thursday’s close at 46504.68 has put the Dow in a position to challenge this indicator early Monday.

The chart pattern is pretty simple. Overcome the 200-day MA and the market will have a strong chance to rally to the retracement zone at 47785.04 to 48428.79. Inside the zone is the 50-day moving average at 48171.79, creating a new resistance zone.

On the bearish side, the inability to overcome the 200-day MA will indicate the presence of buyers. It will also show that there’s a major seller in there, preventing a breakout to the upside. A trade through 45057.28 will reaffirm the downtrend.

First Weekly Gain in Six Weeks

Thursday’s mixed finish doesn’t take away from what was a strong week overall. It was the first weekly gain in six weeks. The markets are closed Friday so traders will be watching the Middle East headlines and economic data over the long weekend. Monday’s open is going to be interesting.

More Information in our Economic Calendar.