* Indexes down: Dow 0.38, S&P 500 0.19%, Nasdaq 0.23%
* Asset managers drop after Blue Owl caps investor withdrawal
* Tesla deliveries mark weakest quarter in a year
* Indexes set for biggest weekly jump in four months (Updates to afternoon trading)
By Sabrina Valle and Twesha Dikshit
April 2 (Reuters) – U.S. stocks pared early losses on Thursday as oil prices pulled back from session highs after diplomatic moves raised some hopes of easing tensions in the Middle East, but inflation concerns still weighed on markets ahead of a long holiday weekend.
Investor sentiment steadied in the afternoon after Iran’s foreign ministry said it was drafting a protocol with Oman to manage traffic through the Strait of Hormuz and Britain said about 40 countries discussed how to end the crisis. Stocks had opened lower amid rising oil prices following remarks from U.S. President Donald Trump that threatened tougher action against Iran.
Front-month crude prices surged, with U.S. crude up nearly 11% at around $111 a barrel. The international reference Brent was up about 6.6% near $108. But traders were pricing it at $81 per barrel in October, a signal that they expect the disruption to be temporary.
“The market has no real conviction either way right now, but October prices tell you the market thinks this crisis will likely be over by the fall,” said Michael Antonelli, market strategist at Baird.
At 2:09 p.m., the Dow Jones Industrial Average fell 0.38% to 46,388.83 points, the S&P 500 lost 0.19% to 6,562.91 points and the Nasdaq Composite lost 0.23% to 21,790.98.
The rebound reflected caution, with investors favoring areas seen as more resilient to economic stress. Utilities, which tend to offer steady earnings and dividends, rose about 0.5%, while consumer staples — makers of everyday necessities — gained nearly 0.4%, as consumer discretionary stocks slid more than 1.4%, the worst-performing sector on the day.
Wall Street had opened sharply lower after Trump signaled more aggressive attacks on Iran, in a sharp reversal from his earlier comments that the U.S. will be “out of Iran pretty quickly”.
Michael Matousek, head trader at U.S. Global Investors, said investors were optimistic about the global economy not being in a recession and a gradual fall in oil prices heading into the long weekend, prompting an improvement in risk appetite.
The three indexes are on track for their biggest weekly rise in four months and the first week of gains in six, as signs earlier this week that the conflict could end soon lifted sentiment.
Wall Street’s fear gauge, the CBOE VIX index rose to 25.24 points after falling to an over one-week low on Wednesday.
Separately, private credit jitters resurfaced after Blue Owl capped the amount investors can withdraw from two of its retail-focused funds, sending its shares down 1.7%.
On the S&P 500, consumer discretionary shares weighed the most, led by a 5.7% drop in Tesla after its first-quarter delivery figures.
Further developments on Elon Musk’s SpaceX will be in focus after it confidentially filed for a U.S. initial public offering on Wednesday, and is expected to target a $1.75 trillion valuation.
Friday’s nonfarm-payroll numbers will be in the spotlight after weekly jobless claims fell last week, but U.S. markets will remain closed throughout the long weekend.
Money market participants are no longer pricing in any easing from the Federal Reserve, per CME Group’s FedWatch Tool. They were anticipating two cuts before the conflict.
Globalstar’s shares jumped 7.8% after a report said Amazon is in talks to buy the low-earth-orbit communication satellites company.
Markets will be closed on Friday for the Good Friday holiday. (Reporting by Sabrina Valle in New York; Johann M Cherian, Purvi Agarwal and Twesha Dikshit in Bengaluru; Editing by Shinjini Ganguli, Maju Samuel and Aurora Ellis)
