The Dow is off its session highs Monday after Tehran pushed back against President Trump's claim of a potential de-escalation of the Iran conflict.
Monday is shaping up to be an easy-come, easy-go day on Wall Street, with U.S. stocks off their session highs after Tehran pushed back against President Donald Trump's claims of a potential de-escalation of the Iran conflict.
The Dow Jones Industrial Average DJIA was still up 631 points, or 1.4%, at 46,208 in Monday trading, but it was well off its 2.2% surge earlier in the day. The S&P 500 SPX and Nasdaq composite COMP were up 1.2% and 1.4%, respectively, while the small-cap Russell 2000 RUT was up 2.3% at 2,494.
Crude-oil prices also were off lows for the session seen after a Truth Social post from Trump, who said that the U.S. and Iran had engaged in "very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East."
Trump said he also instructed the military to postpone all strikes against Iranian power plants and energy infrastructure for a five-day period, "subject to the success of the ongoing meetings and discussions."
Yet Tehran's parliament pushed back on Trump's claims on social media, and the differences between the U.S. and Iranian characterizations of talks were spilling into public view.
"When people are optimistic, stocks move higher throughout the day," said Mark Hackett, chief of investment research at Nationwide, pointing to traders "fading" some of Trump's initial comments around Iran progress. "When you peak early in the day, that's people just not believing it," he told MarketWatch.
The initial reaction from investors was relief, with stocks surging and oil and Treasury yields BX:TMUBMUSD10Y falling. While the market reaction has since tempered somewhat, there still appears to be hope the conflict will ease.
Trump "seems to be interested in this idea of de-escalation" and appears to be "looking for an off-ramp," Michael Brown, senior research strategist at Pepperstone, said in an interview with MarketWatch. Still, "it's probably too early to call a definitive turning point for financial markets right now," he added. "The Strait of Hormuz is still impassable."
"This is a very fluid situation," Matt Miskin, co-chief investment strategist at Manulife John Hancock Investments, said in an interview. "Sentiment around the markets can change on a dime."
Iranian television reports Monday indicated there had not been any talks and that Trump had backed down after Iran threatened to carry out more attacks on critical energy infrastructure in the region. The report was attributed to a senior security official.
Dueling headlines continued to arrive, and Trump has kept on speaking with reporters. Axios reported that Turkey, Egypt and Pakistan have been passing messages between the U.S. and Iran over the past two days to try to mediate a resolution. Before boarding Air Force One to travel to Tennessee on Monday, Trump told reporters that recent talks had hit on major points of agreement, but that there would be no deal unless strict nuclear conditions were met. He said Iran was agreeing not to pursue nuclear weapons. Tehran has yet to comment on this.
Trump also pushed back against Iran's denial of the talks during an interview with Fox Business.
Despite the chaotic news flow, Trump appeared to be following the "TACO" playbook - an acronym for "Trump always chickens out" -according to Daniela Hathorn, senior market analyst at Capital.com. First, he escalated with his weekend threat to start bombing Iranian civilian energy infrastructure, but then walked that back with his announcement Monday morning.
Such a strategy could ultimately backfire, Marko Kolanovic, a former top strategist at J.P. Morgan, said in a post on X early Monday.
Nationwide's Hackett noted that institutional players appeared to be ferociously jumping back in Monday, after aggressively selling late last week. "It feels like today is no less rational than the end of last week," he said. "This isn't so much about a newfound optimism, it's that the one-sided nature of the [recent] selling was unwarranted," he said. "From an index perspective, we've held up pretty well over the past three-week period."
The Russell 2000 index on Friday ended in a correction, and the Dow and Nasdaq were not far behind. A correction is defined as a drawdown of at least 10% from a previous record. The S&P 500 ended Friday only 6.8% off its record from late January, according to Dow Jones Market Data.
Hathorn said headlines Monday reinforce the idea that the Trump administration is actively seeking an exit, even if the path to one remains unclear. The upshot is that stocks could see a solid relief rally this week, although investors will likely continue to be whipsawed by headlines, she said.