(Updates to afternoon U.S. trading)
* Indexes: Dow up 0.10%, S&P 500 gained 0.27%, Nasdaq up 0.52%
* Airline and cruise stocks take a hit, defense stocks rise
* Tech stocks offset broader market losses
* BlackRock-led consortium to acquire AES Corp for $33.4 billion
By Sabrina Valle and Pranav Kashyap
March 2 (Reuters) – U.S. stocks rebounded on Monday afternoon after losses in the morning, when global markets reeled following U.S.–Israeli air strikes in Iran, leaving most major exchanges abroad in the red.
Bargain-hunting U.S. investors bought on dips after the early selloff, showing an expectation that the disruptions from the conflict will be limited.
“Market participants think this is all just temporary and that the problems in the oil patch will disappear,” said Bill Smead, founder and chairman of Smead Capital Management.
The main indexes were modestly higher as the clash initially boosted defense shares and energy prices and pressured travel and interest-sensitive sectors. Later, investors ran to tech and weighed how long the Middle East conflict could run and what the conflict means for inflation and Federal Reserve policy.
Smead said investors were reverting to familiar, high-performing stocks like Nvidia, the Magnificent Seven technology stocks and defense sectors.
“When people get scared, they go back to what is comfortable,” he said.
At 2:30 p.m. the Dow Jones Industrial Average rose 50.36 points, or 0.10%, to 49,028.28, the S&P 500 gained 18.54 points, or 0.27%, to 6,897.13 and the Nasdaq Composite gained 118.73 points, or 0.52%, to 22,786.94.
That resilience contrasted sharply with Europe and Asia, where markets sank under the weight of surging oil prices and war-driven uncertainty.
The French and German stock markets fell more than 1%. Across Asia, Japan’s Nikkei 225 slid 1.73%, having plunged as much as 2% at the open.
Energy companies, whose profits rise alongside oil prices, outperformed, while travel and airline stocks sank due to flight cancelations, higher jet-fuel costs and widespread Middle East airspace closures.
A number of carriers canceled flights, while several oil and gas facilities in the Middle East stopped production. U.S. crude prices were up 6% after being up twice as much during the session. Delta fell more than 2% and United Airlines tumbled over 4%, while crude-price-sensitive cruise stocks such as Carnival lost 6% and Norwegian Cruise fell over 10%. Offsetting those losses, Nvidia gained 2.8% and Microsoft climbed 1.5%, recovering from sharp declines last month. The gains helped the S&P 500 and the Nasdaq cut losses after briefly hitting two-week lows earlier in the session. Defense stocks also got a boost, with Lockheed Martin up 2.5% and Palantir up 5.9%, with geopolitics in the spotlight after coordinated U.S. and Israeli strikes on Iran over the weekend killed Tehran’s Supreme Leader. President Donald Trump also told CNN the “big wave” is yet to come, although some Middle Eastern countries were lobbying U.S. allies to persuade a swift end to the war. Wall Street’s fear gauge, the CBOE VIX, eased from a three-month high hit earlier in the day and was last up 1.55 points at 21.41.
Wells Fargo’s Ohsung Kwon warned the S&P 500 could fall to 6,000 points, nearly 13% below its last close, if crude surpasses $100 per barrel, with earnings potentially taking a 1.3% hit. On the earnings front, Norwegian Cruise forecast annual profit below Wall Street expectations. AES Corp fell 17.3% after a consortium led by BlackRock-owned Global Infrastructure Partners and equity firm EQT AB agreed to acquire the utilities company for $33.4 billion at a discount to its last close. Crypto stocks Coinbase and Strategy rose more than 5% each as bitcoin rallied.
(Reporting by Sabrina Valle in New York; Pranav Kashyap, Johann M Cherian, Shashwat Chauhan and Ragini Mathur in Bengaluru; Editing by Sherry Jacob-Phillips, Anil D’Silva, Maju Samuel and David Gregorio)