Nasdaq sets record high, oil dips on improved crude flows

By Karen Brettell

NEW YORK, Sept 22 (Reuters) - The tech-heavy Nasdaq hit a record closing high on Tuesday, while oil prices and Treasury yields dipped in choppy trading as crude flows through the Middle East improved.

The Nasdaq was boosted by Micron Technology and other AI-related stocks as AI demand showed no signs of abating and corporate earnings stayed resilient.

"We maintain our constructive outlook on the AI trade, supported by rising adoption and monetization, as well as growing capital spending," said Ulrike Hoffmann-Burchardi, chief investment officer Americas and global head of equities at UBS’ Chief Investment Office.

The Nasdaq Composite rose 0.45% while the S&P 500 was flat and the Dow Jones Industrial Average fell 0.36%.

MSCI's gauge of stocks across the globe rose 0.11%. The pan-European STOXX 600 index gained 0.13%.

Lower oil prices added to risk appetite after a senior Iranian official told Reuters that Tehran can reopen the Strait of Hormuz within seven days if the United States eases military pressure and lifts its blockade on Iranian ports.

Prices had briefly risen after US President Donald Trump said that a peace deal with Iran was likely after the midterm elections, which are scheduled for November. That is further away than many investors hoped.

"Naturally, he would be aiming for a deal before the midterms in order to preserve Republican control but it doesn't look like he thinks that's possible," said Adam Button, chief currency analyst at investingLive.

Oil fell again on increasing flows of Saudi crude with the restart of the East-West pipeline and ship movements through the Strait of Hormuz, through which 20% of global supply moved before the US-Israeli war on Iran began in late February.

US crude was last down 0.6% at $94.59 a barrel and Brent fell to $98.30 per barrel, down 2.03% on the day.

RATE HIKES ON THE WAY 

US 10-year Treasury yields fell 1 basis point on the day to 4.953%, retreating in line with oil.

They remain elevated, however, as investors price in another round of rate hikes from major central banks as inflation remains sticky.

The dollar gained 0.12% on the euro to $1.1448 and was little changed on the day at 157.37 Japanese yen.

The Bank of Japan raised rates last week to a 31-year high, but two dissenting votes and a lack of explicit hawkish guidance disappointed investors, which has left the yen vulnerable and kept traders on alert for signs of official intervention. 

"FX intervention remains a blunt tool to prop up currencies, and without a forceful monetary policy response it will be difficult for Japanese authorities to rein in the selloff in the yen," said Matthew Ryan, head of market strategy at Ebury.

The Federal Reserve raised rates last week and warned its fight against inflation was not over, keeping the door open to further tightening.

TRUMP-XI MEETING AWAITED

Attention is also turning to a meeting between Trump and Chinese President Xi Jinping later this week, with investors watching for any indications that the leaders of the world's two largest economies can prevent a further deterioration in relations.

Xi arrives in Washington on Wednesday for the first time in more than a decade, helping fuel optimism that a trade truce between the two countries will be extended and there could be cooperation over AI.

"For markets, the big question is what’s going to happen when the current one-year trade truce expires in November, and whilst the general tone remains positive, there still isn’t an agreement yet," Deutsche Bank strategist Jim Reid said.  

(Reporting Karen Brettell, Amanda Cooper and Ankur Banerjee; Editing by Andrew Cawthorne, Alexander Smith and Jamie Freed)