US markets hit record highs as AI rally and Iran ceasefire hopes lift Wall Street
Strong corporate earnings and easing inflation concerns drive tech-led gains, while diplomatic developments with Iran provide a backdrop of cautious optimism for investors.
US equity markets closed at record highs on Tuesday, propelled by robust corporate earnings, particularly in the artificial intelligence sector, and easing inflation expectations. The Nasdaq Composite and S&P 500 posted gains of 1.2% and 0.6% respectively, while the Dow Jones Industrial Average slipped slightly. A significant driver of investor sentiment was a statement from President Donald Trump indicating that a memorandum of understanding to end the conflict involving the US, Israel, and Iran had been largely negotiated. This diplomatic development coincided with a surge in Micron Technology shares, which briefly pushed the company’s market capitalisation above $1 trillion.
The rally was anchored by strong performance in the technology sector, with chipmakers and AI-related stocks leading the charge. Micron Technology shares surged following a bullish price target upgrade from UBS, adding momentum to the tech-led trade that has powered much of this year’s gains. Other notable risers included Marvell Technology and AppLovin, while major giants such as Nvidia, Alphabet, Apple, and Amazon edged higher. The Nasdaq 100 and S&P 500 traded in record highs, with the latter on track for its eighth consecutive week of gains.
Investor sentiment was further bolstered by falling Treasury yields as inflation concerns temporarily cooled. Corporate earnings continued to exceed expectations across several sectors, reinforcing confidence that businesses are managing to grow despite higher interest rates. Year-on-year earnings growth for S&P 500 constituents reached 28.4%, marking the highest rate since the post-pandemic rebound in 2021. Data from the Conference Board showed US consumer confidence edging higher to 93.1, topping economists’ expectations of 92 and suggesting cautious optimism about jobs and spending.
Despite the upbeat market tone, geopolitical tensions remained a key factor. WTI crude futures dropped below $91 a barrel before climbing back to $92.60, influenced by mixed signals from diplomatic talks and renewed US strikes on southern Iran. US Secretary of State Marco Rubio indicated that negotiations with Iran would likely take a few more days to conclude, tempering immediate hopes for a full resolution. However, the broader market remained cautiously optimistic, balancing geopolitical risks against strong earnings and resilient economic data.
The week’s performance reflected a complex interplay of factors, with investors tentatively welcoming signs of progress towards a ceasefire deal. Axel Rudolph, chief technical analyst at trading platform IG, noted that falling yields and retreating oil prices helped US stock indices kick off the week on a strong footing. As traders returned from the Memorial Day holiday, the market’s focus remained on the potential for a breakthrough in diplomatic talks and the continued strength of the artificial intelligence sector.
