Morning Wrap: ASX 200 to rise, Dow hits record close, S&P 500 swings on US-Iran progress

In a nutshell:

• Dow Jones closed at an all-time high of 50,285.66 as oil pulled back, with the S&P 500 and Nasdaq eking out gains in a volatile session

• US and Iran appeared to reach a draft agreement with Tehran saying the latest Washington proposal "partly bridged the gap," but details remained scarce and Supreme Leader Khamenei's decree barring enriched uranium from leaving the country clouded the outlook

• Nvidia finished slightly lower despite a Q1 FY27 beat as Q2 guidance only marginally topped buy-side expectations, Walmart fell sharply on weak FY27 guidance citing fuel-cost pressures, and SpaceX publicly filed its S-1 for a record-breaking IPO at a $1.5-2 trillion valuation

Let's dive in.

• Major US benchmarks finished higher, recovering from sharp morning losses as oil pulled back from a brief ~4% spike to US$109

• Markets briefly dipped on skepticism around progress on US-Iran deal, after Khamenei insisted all enriched uranium remained inside the country

• Vague reports of a US-Iran deal lifted stocks higher, early details include an immediate ceasefire, freedom of movement in the Strait, but nothing on nuclear

• Breadth was solid, with eight sectors higher and the Equal-weight S&P 500 (+0.43%) outperforming the cap-weighted index by 26 bps

• US 10-year yield also reversed early gains, now down 1 bp to 4.57%, extending its retreat from a 16-month high of 4.68% hit two sessions ago

• Retail-driven trading dynamics reshaping market responses to Trump's policies and the Iran war (RT)

• Junk debt outperforms other fixed-income markets as yields rise, yet investor unease grows amid low spreads (BBG)

• Asian currencies and bonds face extreme bear scenarios on prolonged Iran war, with analysts mapping India rupee to 100/USD, Indonesia rupiah to 18,000 and Philippine peso to 65 (BBG)

• US and Iran reach a draft agreement, according to Iran’s ILNA news agency, details expected to be announced in the next few hours (IL)

• Iran's Supreme Leader Khamenei ordered the country's near-weapons-grade enriched uranium stockpile must not be shipped abroad, hardening Tehran's stance on a core US demand in peace talks (WT)

• President Trump said in the Oval Office: "We don't need it, we don't want it. We'll probably destroy it after we get it, but we're not going to let them have it," warning Iran faces "drastic" action if it does not agree to terms (WT)

• Iran said the latest Washington proposal "partly bridged the gap" between the two sides, with Pakistani mediators working to extend the conditional ceasefire that has been in place since April 8 (BBG)

• Two supertankers transporting Iraqi oil to China crossed the Strait (FT)

• Iran rebuilding military capabilities damaged by US and Israeli strikes, restarting drone production (CNN)

• Saudi Arabia's oil export revenue soared to $24.7bn amid rising energy prices and Red Sea shipments (BBG)

• SpaceX publicly filed S-1 targeting up to $75bn raise at $1.5-2 trillion valuation, with Goldman Sachs as lead-left underwriter, ticker SPCX on Nasdaq, potential June 12 listing (CNBC)

• SpaceX Q1 net loss widened to $4.30bn on revenue of $4.70bn, with $10.10bn in capex including $7.72bn on AI, and debt of $29.1bn (MS)

• Anthropic on track for first profitable quarter, surpassing competitors OpenAI and xAI (TI)

• Walmart shares tumbled ~7% after Q1 FY27 net sales rose 7.1% to $175.68bn, reiterated FY27 EPS guidance of $2.75-$2.85 missed ests of $2.91, with CFO citing higher fuel costs among other operating headwinds (TS)

• Intuit shares plunged 20% after announcing a 17% workforce reduction (~3,000 jobs) and $300-340 million restructuring charge, even as Q3 FY26 revenue rose 10% to $8.56bn (SEC)

• Nvidia Q1 FY27 revenue up 85% to $81.6bn, beating ests $78bn by 4.6%, Data Center revenue up 92% to $75.2bn, with Q2 guidance of $91bn topping $86bn ests, but shares slipped as guide only marginally beat buy-side whispers (CNBC)

• Nvidia announced an additional $80bn share buyback and raised quarterly dividend 25-fold to $0.25 from $0.01 (SEC)

• Nvidia highlights progress in diversification, aiming to reduce reliance on data centers (BBG)

• Oura, the wearables company, reportedly filed confidentially for an IPO, joining SpaceX, OpenAI and Anthropic among the rush of mega offerings to Wall Street (TS)

• Bessent says China will accept restoration of prior US tariff rates through ongoing Section 301 investigations, "as long as they don't go higher" (CB)

• China's Commerce Ministry said it hopes US will "honor commitments" and ensure US tariffs on China will not exceed levels agreed at the Trump-Xi Busan meeting in October (CB)

• BOJ's Koeda warns that Middle East tensions may push inflation above targets (WSJ)

• Markets are pricing roughly a 40% chance of a 25bp Fed rate hike in December as a majority of FOMC policymakers said additional hikes may be warranted if inflation stays sticky above 2% (TE)

• Eurozone composite flash PMI fell to 47.50 in May from 48.80 in April, slipping deeper into contraction territory as services PMI plunged to 46.4 (5-year low) from 47.6 against 47.7 ests, driven by rising living costs and Iran-war-related inflation (BBG)

• UK composite flash PMI dropped to 48.5 in May from 52.6 in April, marking the first contraction in over a year, with services PMI plunging to 47.9 vs 51.8 expected (sharpest downturn since early 2021) on political uncertainty and Iran war headwinds (FT)

• Japan April exports jumped 14.8% year-on-year to a near-record JPY 10,507.3bn, smashing the 9.3% Reuters poll forecast, with semiconductor shipments surging 41.6% and China-bound exports up 15.5% (RT)

• South Korea exports surged 65% year-on-year to a record $52.7bn in the first 20 days of May, with semiconductor shipments up 202% to $21.9bn (BBG)

• Australia April unemployment rate unexpectedly jumped to 4.5% from 4.3%, the highest since November 2021 and the biggest miss versus 4.3% ests since June last year (BBG)

• RBA June hike probability dipped to 8% from 20% (RT)

• Super Retail Group acknowledges media reports that Rebel Sport has been identified as a party in Federal Court proceedings relating to underpayments, no claim served at this point in time (SUL)

• Bounce back continues: A relatively choppy overnight session, but the VIX, oil and yields all edged lower, while the blue-chip Dow hit a record high. A mediated ceasefire agreement is said to be announced in a few hours. Our overnight ETF watchlist observed slight gains for Airlines (Jets ETF up 2.1%), while uranium, copper miners, home builders and rare earth/strategic metals edged higher. Underperformers included Energy, software/fintech and some slight weakness in gold and nickel miners. The Aussie 10-year yield fell 16 bps between Wed-Thu to 4.94%. It's still elevated but tracking towards the lower end of the recent trading range.

• Bapcor downgraded to Sell from Neutral; target cut to $0.36 from $0.74 (Goldman Sachs)

• Bega Cheese initiated Overweight with $6.70 target (Morgan Stanley)

• Boss Energy upgraded to Neutral from Underperform; target remains $1.30 (Macquarie)

• Paladin Energy upgraded to Outperform from Neutral; target remains $13.25 (Macquarie)

• Telstra downgraded to Neutral from Outperform; target cut to $5.57 from $5.64 (Macquarie)

Stocks trading ex-dividend: 

• Fri 22 May: None

• Mon 25 May: Aristocrat Leisure (ALL) – $0.50, Embark Early Education (EVO) – $0.015

• Tue 26 May: Elders (ELD) – $0.18, Newmont (NEM) – $0.254

• Wed 27 May: Amcor (AMC) – $0.91, Morphic Ethical Equities Fund (MEC) – $0.01, Webjet Group (WJL) – $0.02

Other ASX corporate actions today:       

• Dividends paid: HomeCo Daily Needs REIT (HDN), Waypoint REIT (WPR)

• IPOs: None

• Earnings: Select Harvests (SHV)

• AGMs: None

Economic calendar (AEST):

• 9:30 am: Japan Inflation

• 4:00 pm: UK Retail Sales