By Stephen Culp
NEW YORK, May 29 (Reuters) – U.S. stocks followed world shares higher and crude prices retreated on Friday as investors neared the end of a holiday-shortened week with renewed hopes of progress toward a peaceful resolution to the Iran war.
A narrow, tech-led rally lifted all three major U.S. stock indexes to modest gains while benchmark U.S. Treasury yields dipped for a fourth straight session, as markets turned the page on a week and month marked by fears that a fragile truce would collapse amid signs of progress toward a peace deal.
The S&P 500 notched its ninth straight weekly gain, its longest winning streak since December 2023.
All three indexes logged monthly advances.
Despite the rally, the indexes were well off session highs by the closing bell.
The United States and Iran agreed to extend their ceasefire and lift shipping restrictions as peace negotiations proceed, sources told Reuters, but U.S. President Donald Trump had yet to approve the deal which, according to Iranian state media, has not yet been finalized.
“This administration watches the markets and they like to do big things when the markets are closed to control the messaging before the market has a chance to react,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.
“If the memo of understanding is approved by President Trump and we truly get 60 days of the Strait of Hormuz re-opened … I think 60 days should be plenty of time to come to a more substantive agreement,” he added.
The three-month-long conflict has put upward price pressure on inflation, which threatens to grow less transitory and more established the longer the war drags on.
U.S. Federal Reserve officials are now mulling the possibility of hiking interest rates to counter that growing risk.
“The market has been pricing about a coin flip odds of a hike (in the fourth quarter) for a couple of weeks now,” Mayfield said. “We’ll have plenty of data by then, but I don’t expect the Fed to do much of anything.”
The Dow Jones Industrial Average rose 363.68 points, or 0.72%, to 51,032.65, the S&P 500 rose 16.49 points, or 0.22%, to 7,580.12, and the Nasdaq Composite rose 55.15 points, or 0.21%, to 26,972.62.
European shares closed modestly higher and scored gains for the month, which was marked by hopes for a deal that would reopen the Strait of Hormuz. The waterway’s closure has strained the global economy and agitated markets.
MSCI’s gauge of stocks across the globe rose 5.75 points, or 0.51%, to 1,130.47.
The pan-European STOXX 600 index rose 0.14%, while Europe’s broad FTSEurofirst 300 index rose 2.53 points, or 0.10%.
Emerging market stocks rose 25.91 points, or 1.50%, to 1,750.60.
Brent crude oil prices eased as the market awaited confirmation that the United States and Iran have extended their truce.
U.S. crude fell 1.73% to settle at $87.36 per barrel, while Brent settled at $92.05 per barrel, down 1.77% on the day.
Treasury yields were lower for the fourth straight session, closing out a week in which reported progress in U.S.-Iran peace negotiations fueled market optimism.
The yield on benchmark U.S. 10-year notes fell 1.4 basis points to 4.441%, from 4.455% late on Thursday.
The 30-year bond yield fell 0.3 basis point to 4.9817%, from 4.985% late on Thursday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 2.9 basis points to 3.996%, from 4.025% late on Thursday.
The dollar dipped in the wake of reports of a U.S.-Iran interim agreement.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.1% to 98.90, with the euro up 0.1% at $1.1663.
Against the Japanese yen, the dollar strengthened 0.01% to 159.26.
Gold got a boost from ceasefire optimism but remained on course for a monthly drop.
Spot gold rose 1.18% to $4,545.00 an ounce. U.S. gold futures rose 0.98% to $4,543.60 an ounce.
(Reporting by Stephen Culp; Additional reporting by Iain Withers in London and Tom Westbrook in Singapore; Editing by Joe Bavier, Nick Zieminski and Edmund Klamann)