US STOCKS-Wall Street off session lows as Trump's Iran deadline looms

By Stephen Culp and Purvi Agarwal

NEW YORK, April 7 (Reuters) - U.S. stocks were lower on Tuesday as investors steeled themselves ahead of President Donald Trump's deadline for Iran to open the Strait of Hormuz.

All three major U.S. stock indexes were well off session lows as markets awaited signs of progress in ongoing negotiations.

Even so, the S&P 500 and the Nasdaq remained on track to snap their respective four-day streaks of gains.

"Clearly, markets are focused on the looming deadline put forward by the administration for 8 o’clock this evening," said Bill Northey, senior investment director at U.S. Bank Wealth Management in Billings, Montana. "Markets are seeking some degree of clarity regarding an escalation or an offramp."

While attacks on Iran intensified, the country had not yet allowed traffic to resume through the crucial Strait of Hormuz waterway, despite Trump's threats if a deal is not reached by the end of Tuesday.

Oil prices have surged since the United States and Israel declared war on Iran on February 28, rattling markets, igniting fears of rising inflation and dampening hopes that the U.S. Federal Reserve will cut interest rates this year.

Front month U.S. WTI crude CLc1 backed off from session highs, and was last up 1.1%.

Chicago Fed President Austan Goolsbee said he was worried that the war would drive inflation higher while dampening the economy, resulting in a stagflationary shock and putting the central bank in a bind.

On the economic front, a report from the Commerce Department showed new orders for durable goods decreased more than analysts expected in February, before the onset of the war.

Later in the week, the Labor Department's consumer price index (CPI) will provide a glimpse at the extent to which the war on Iran has affected inflation.

The Dow Jones Industrial Average .DJI fell 167.41 points, or 0.36%, to 46,502.47, the S&P 500 .SPX lost 19.56 points, or 0.30%, to 6,592.27 and the Nasdaq Composite .IXIC lost 100.19 points, or 0.45%, to 21,896.15.

Of the 11 major sectors of the S&P 500, consumer staples .SPLRCS were down the most, while communication services .SPLRCL enjoyed the largest percentage gains.

Dow Transports .DJT were clear outperformers on the day.

UnitedHealth UNH.N jumped 10.5% and peers Humana HUM.N and CVS Health CVS.N gained 8.8% and 6.6%, respectively, after the U.S. government announced on Monday it would raise payments to private insurers offering Medicare Advantage plans to older adults, an increase from the near-flat change proposed earlier.

Shares of Apple AAPL.O dropped 2.7% after Nikkei Asia reported that the gadget maker's long-awaited foldable phone is encountering engineering setbacks.

Chipmaker Broadcom AVGO.O advanced 5.2% after signing a long-term deal with Alphabet GOOGL.O to develop its AI chips and other components.

Intel INTC.O gained 2.9% after the company said it would join Elon Musk's Terafab AI chip complex project along with SpaceX, Tesla TSLA.O and xAI.

Declining issues outnumbered advancers by a 1.5-to-1 ratio on the NYSE. There were 73 new highs and 59 new lows on the NYSE.

On the Nasdaq, 1,776 stocks rose and 2,842 fell as declining issues outnumbered advancers by a 1.6-to-1 ratio.

The S&P 500 posted 2 new 52-week highs and 6 new lows while the Nasdaq Composite recorded 46 new highs and 103 new lows.