Stocks steady at record highs as AI optimism trumps Iran tensions

By Chibuike Oguh

NEW YORK, June 1 (Reuters) - Global stocks clung to record highs on Monday as strong corporate results, fueled in part by artificial intelligence optimism, outweighed investor concerns over escalating U.S.-Iran tensions that have pushed oil prices higher.

The United States said it struck Iranian military sites during the weekend and Iran's Revolutionary Guards said on Monday it had targeted a U.S. base in response. Iranian news agency Tasnim said Iran is halting indirect negotiations with the United States after Israel ordered troops to push deeper into Lebanon to battle Iranian-backed Hezbollah. 

The fresh hostilities could complicate diplomatic efforts to end the three-month-old war.

On Wall Street, stocks eked out gains to finish near record highs after trading flat early in the session as energy and technology stocks took the front seat, while utilities and consumer discretionary led losers. 

The Dow Jones Industrial Average rose 0.09%, the S&P 500 added 0.26%, and the Nasdaq Composite gained 0.42%.

The pan-European STOXX 600 index fell 0.76%.

"The Iran story continues to swirl around in the background, and I think it's pretty interesting and impressive that the market has been able to, not completely ignore it, but dismiss a lot of the noise," said Amanda Agati, chief investment officer at PNC Asset Management Group in Philadelphia.

"Earnings growth and Q1 earnings season, and even the revisions for Q2, are looking really strong. And so I think it's just sort of this interesting dynamic where usually the headlines are driving the market narrative, but this market is trying to price a path to peace, whatever that ultimately looks like," Agati said.

Nvidia unveiled a new chip on Monday that puts AI capabilities directly into laptops and desktop computers, raising the stakes in the battle for dominance among other semiconductor makers and technology companies. 

AI giant Anthropic said on Monday it has confidentially filed for a U.S. initial public offering.

The MSCI All-World index rose 0.10% after hitting a fresh record high on the day.

"We are in an unusual period for the market where the fundamentals and technicals converge to drive markets higher, with strong earnings revisions and relentless buying," said Mark Hackett, chief market strategist at Nationwide in Philadelphia. "Equity markets have been largely immune to Iran news over the past several weeks because investors are afraid of being caught on the wrong side if a significant development occurs."

Brent crude futures rose 4.24% to settle at $94.98 a barrel.

DATA LINE UP

Investors are eyeing commentary from a host of Federal Reserve speakers this week as well as major U.S. data including the May payrolls report on Friday.  

U.S. manufacturing activity increased more than expected in May, hitting the highest level in four years, likely driven by businesses front-loading orders amid rising prices and shortages because of the Iran war, Institute for Supply Management data showed on Monday.

The yield on benchmark U.S. 10-year notes held steady at 4.453%.

"Inflation is still a major story: you see it in the long-term bond yields and continue to see it in crude oil," said Bill Strazzullo, chief market strategist at Bellcurve Trading in Boston. "The situation in Iran is still a mess. But all that said, the short-term momentum still pushes higher."

The dollar rose against major currencies including the euro and yen.

The euro was down 0.25% against the dollar at $1.163. The Japanese yen weakened 0.26% against the greenback to 159.69 per dollar, remaining near the 160 level that prompted authorities to intervene to support the currency.

Against the Swiss franc, the dollar strengthened 0.72% to 0.787. The dollar index, which measures the greenback against a basket of currencies including the yen and euro, rose 0.19% to 99.20.

Spot gold fell 1.17% to $4,482.54 an ounce while bitcoin fell 2.88% to $71,534.19.

(Reporting by Chibuike Oguh in New York; Editing by Chizu Nomiyama and Nia Williams)