New Delhi, June 18 -- Stocks looked set to focus on hope over caution Thursday, partly reversing the sharp declines that followed a surprisingly hawkish meeting of the Federal Reserve under new Chairman Kevin Warsh. Investors on Thursday were favoring a tentative peace agreement with Iran signed by President Donald Trump.

Betting on which way investors lean likely will define the stock market's direction over the summer months.

The president put his signature to a so-called memorandum of understanding late Wednesday in Versailles that will start the clock on 60 days of peace talks. However, he also crossed several of his previous "red lines" of negotiations by hinting that Iran could continue to enrich uranium, keep its ballistic missil...