US Stocks Recover as Oil Prices Fall After Sharp Market Swings

U.S. stocks erased early losses Thursday after oil prices suddenly reversed lower, helping ease investor fears about inflation, borrowing costs and global economic pressure.

The S&P 500 gained 0.2% and moved closer to the record high it reached last week. Meanwhile, the Dow Jones Industrial Average climbed 351 points, or 0.7%, while the Nasdaq Composite added 0.2%.

Markets initially dropped after oil prices surged during morning trading. However, sentiment improved once crude prices sharply reversed direction.

Oil prices reverse after early surge

Brent crude briefly climbed above $109 per barrel Thursday morning amid ongoing fears surrounding the war involving Iran and continued disruption in the Strait of Hormuz.

The closure of the key shipping route has prevented many oil tankers from leaving the Persian Gulf, tightening global supply and increasing concerns about inflation.

By midday, though, Brent crude had fallen 2% to $102.93 per barrel.

That decline immediately relieved pressure across financial markets.

Treasury yields ease as investors calm down

Lower oil prices also reduced stress in the bond market, where rising Treasury yields have recently rattled investors.

The U.S. 10-year Treasury yield briefly approached 4.63% before dropping back to 4.55%. Elevated yields have raised concerns about:

• Higher mortgage rates
• Slower economic growth
• Expensive business borrowing
• Reduced investment in AI infrastructure

Higher borrowing costs have become especially important for companies investing heavily in artificial intelligence data centers, one of the biggest drivers of recent U.S. economic growth.

Small-cap stocks and airlines lead gains

Lower yields helped boost smaller companies that rely heavily on borrowing to expand operations.

The Russell 2000 jumped 1.2%, outperforming the broader market.

Airline stocks also benefited from cheaper oil prices:

• Southwest Airlines rose 2.8%
• American Airlines gained 3.6%

Meanwhile, Ralph Lauren surged 15% after posting stronger-than-expected quarterly earnings and revenue.

Nvidia slips despite strong earnings

Despite another strong earnings report, Nvidia fell 1.5%.

The chip giant exceeded Wall Street expectations on both revenue and profit while forecasting continued strong growth fueled by AI demand.

CEO Jensen Huang described the AI infrastructure boom as “the largest infrastructure expansion in human history.”

Still, analysts said investors may have taken profits after Nvidia shares gained nearly 70% over the last year.

Some investors are also growing concerned about:

• High AI stock valuations
• Overdependence on AI spending
• Nvidia’s financial ties with companies using its chips

Walmart warns of softer profits

Walmart dropped 6.8% despite reporting strong sales growth.

The retailer warned that upcoming profits could fall below analyst expectations, signaling growing pressure on consumer spending as inflation continues squeezing household budgets.

Walmart has benefited from consumers seeking cheaper shopping options, but executives acknowledged that Americans remain cautious with discretionary spending.

Economic data sends mixed signals

New economic reports released Thursday painted a mixed picture of the U.S. economy.

A flash survey from S&P Global showed:

• Slower-than-expected growth in the services sector
• Stronger manufacturing activity

Chris Williamson, chief business economist at S&P Global Market Intelligence, warned that the Middle East conflict is increasingly impacting business confidence.

At the same time, another report showed fewer Americans applied for unemployment benefits last week, suggesting the labor market remains relatively resilient.

Asian markets see sharp moves

Global markets remained volatile Thursday.

In Asia:

• Kospi surged 8.4%
• Samsung Electronics jumped 8.5%
• SK Hynix climbed 11.2%

Japan’s Nikkei 225 rose 3.1%, while markets in Hong Kong and Shanghai finished lower.

Investors worldwide continue monitoring oil prices, Treasury yields and developments involving Iran, all of which remain key drivers for financial markets heading into the summer.