Stocks climb, yields dip as investors focus on US-Iran talks

By Caroline Valetkevitch and Stefano Rebaudo

NEW YORK/MILAN, May 22 (Reuters) - Major stock indexes rose and Treasury yields eased on Friday as investors weighed the likelihood of a near-term deal to end the U.S. and Israeli war on Iran.

Oil prices gained as much uncertainty surrounding the Iran talks remained.

U.S. Secretary of State Marco Rubio said that the United States has seen some progress towards a deal with Iran but more work is required. Diplomatic efforts intensified to find an end to a conflict that began in late February.

Iran's foreign minister met Pakistan's interior minister on Friday to discuss proposals to end the U.S.-Israeli war, Iranian media reported.

On Wall Street, the Dow hit a record high for the first time since the Iran war began, and the S&P 500 was on track for its eighth straight weekly gain. Stocks have been driven higher by booming demand for AI-related stocks even as concerns about economic fallout from the war remained.?

While gaps have been narrowed between Iran and the United States, there are still sticking points over Iran's enriched uranium and control over the Strait of Hormuz.

Investors are worried that ongoing energy disruptions will filter through to core consumer prices, potentially forcing a tighter monetary policy response.

"There's a lot of waiting on geopolitical issues. That is keeping some people on the sidelines, but overall the market believes it's all going to be resolved eventually," said Tim Ghriskey,?senior portfolio strategist at Ingalls & Snyder in New York.?

"Toward the end of the day, you might see some selling pressure" ahead of the long U.S. weekend, he said. U.S. stock and bond markets will be closed Monday in observance of Memorial Day.?

The Dow Jones Industrial Average rose 369.12 points, or 0.73%, to 50,654.78, the S&P 500 rose 43.59 points, or 0.58%, to 7,489.09 and the Nasdaq Composite rose 164.55 points, or 0.63%, to 26,457.65.

MSCI's gauge of stocks across the globe rose 7.21 points, or 0.65%, to 1,114.10. The pan-European STOXX 600 index rose 0.8%.

The yield on the benchmark 10-year Treasury note was last down 3.4 basis points (bps) at 4.552%. A selloff early in the week led yields to hit months- or years-long highs, with the 10-year yield on Tuesday reaching its highest level since January 2025.

Turkey's financial markets rebounded after being rattled this week by political moves against the country's main opposition party.?The benchmark BIST 100 index rose 4.5% in Istanbul, recovering from a 6% plunge on Thursday that had triggered a suspension of trading after a top court moved to effectively oust main opposition leader Ozgur Ozel.

OIL UP,? US CONSUMER SENTIMENT DOWN

Investors also digested a survey showing U.S. consumer sentiment plunged to a record low in May as surging gasoline prices fuelled anxiety over worsening affordability.

Oil prices were higher, but remained on track for a weekly loss. U.S. crude rose 1.34% to $97.64 a barrel and Brent rose to $104.08 per barrel, up 1.48% on the day.

The dollar held near six-week highs as traders monitored talks on the war and assessed whether the Federal Reserve would raise interest rates if inflation continued to accelerate.

The dollar index, which measures the greenback against a basket of currencies, including the yen and the euro,rose 0.12% to 99.32, with the euro down 0.15% at $1.16.

Against the Japanese yen, the dollar strengthened 0.1% to 159.12.

Data on Friday showed Japan's core inflation slowed to a four-year low in April, complicating the outlook for Bank of Japan policy.

Spot gold fell 0.6% to $4,514.12 an ounce.?

(Reporting by Caroline Valetkevitch in New York and Stefano Rebaudo in Milan; Editing by Kim Coghill, Thomas Derpinghaus, Sharon Singleton and Aurora Ellis)