Dow rises 257 points as Iran peace hopes lift markets

U.S. stocks opened higher on Friday as reports of a U.S.-Iran draft memorandum of understanding lifted investor sentiment. The Dow Jones Industrial Average gained 257 points, or 0.51 percent, the S&P 500 rose 0.12 percent and the Nasdaq Composite fell 0.11 percent.

The draft agreement could lead to the reopening of the Strait of Hormuz and the lifting of U.S. oil sanctions on Iran, officials said, though Tehran has not made a final decision. Officials familiar with the talks indicated a signing could take place in Switzerland as soon as Sunday. President Donald Trump had said planned military strikes were called off and that diplomacy was progressing.

The prospect of reduced geopolitical risk pushed global equities higher. Japan’s Nikkei 225 advanced 2.8 percent, South Korea’s Kospi rose 4.6 percent and India’s Nifty 50 added 1.3 percent. China’s Shanghai Composite gained more than 1 percent and Europe’s Stoxx 600 increased about 1.7 percent.

Crude oil prices fell after the diplomatic signals, easing earlier supply concerns. After the decline in oil, traders pushed back the likely timing of the next Federal Reserve interest-rate increase from October to December, according to the CME Group’s FedWatch tool.

Investor attention also focused on SpaceX’s planned initial public offering. The company set a $135 share price, implying a valuation near $1.77 trillion, and intends to sell 555.6 million shares to raise roughly $75 billion. The offering was reported to be nearly four times oversubscribed while only about 3 to 4 percent of the company’s stock would be available in public hands.

Some analysts pointed to recent weakness in technology stocks and a sharp decline in bitcoin as signs investors may be raising cash ahead of the SpaceX listing. Douglas Beath, global equity strategist at Wells Fargo Investment Institute, wrote that large IPO issuance often occurs during strong equity market sentiment but can cause short-term market indigestion and noted household equity exposure is near all-time highs.

Traders and portfolio managers balanced the immediate relief from reduced Middle East tensions with concerns about inflation, energy prices and high equity valuations. Markets finished the week on firmer footing as investors prepared for the implications of what would be the largest IPO in U.S. history.