The Dow Jones Industrial Average climbed 507.24 points or 1.19%, closing at 43,089.02 on Tuesday as investors bet that a delicate ceasefire between Israel and Iran will hold. The S&P 500 gained 1.11% to end at 6,092.18, while the Nasdaq Composite advanced 1.43%, settling at 19,912.53. The Nasdaq 100 added 1.53% for a record close of 22,190.52.
Oil prices continued to drop sharply for a second straight day, with the U.S. crude benchmark falling more than 7% on Monday and international benchmark Brent Crude dropping 6.1%. The decreased oil prices benefited airline stocks, with shares of major airlines rising more than 2%. Cruise lines also saw gains as investor appetite for risk grew.
President Donald Trump attempted to salvage the ceasefire between Israel and Iran, which took effect early Tuesday morning. Both sides have accused each other of violating the agreement, with Israel claiming a radar system near Tehran was attacked, and accusing Iran of launching missile strikes against Israel, which Iran denies. Trump stated that “Israel is not going to attack Iran,” indicating that the ceasefire remained intact.
He expressed frustration with both nations for breaking the agreement. “The key event for the market was how quick and limited the US involvement was, as well as the ‘weak’ response from Iran which was essentially a choreographed fireworks display for domestic consumption,” said Jon Brager, portfolio manager at Palmer Square Capital Management. “So even if the ceasefire results in occasional flare-ups, the market has decided this risk is now in the rearview mirror and the focus probably returns to tariffs and fiscal policy.”
Tuesday’s gains added to the strong advances from Monday.
The major averages jumped after Qatar’s Defense Ministry reported that its air defense intercepted an Iranian missile aimed at a U.S. military base. Over the week, the major averages have risen more than 2%. Investors also analyzed comments from Federal Reserve Chairman Jerome Powell before the House Financial Services Committee.
Powell indicated that the central bank is in no rush to cut interest rates and will wait to see how tariffs impact the economy.
Dow surges amid ceasefire hopes
He is facing pressure from the White House to cut rates.
A potential weakening in the labor market might prompt the Federal Reserve to cut interest rates by September, according to Pantheon Macroeconomics senior U.S. economist Oliver Allen. “The FOMC’s hesitation to commit to a particular course on monetary policy is understandable given the big uncertainties around tariffs and their economic impact,” Allen wrote on Tuesday. “But the evidence of a marked deterioration in the labor market will be stark enough by September to convince the Fed to resume easing policy, despite lingering worries about inflation.”
Oil prices could slide further if the current range of $64 to $65 per barrel is breached, according to Piper Sandler.
“If it fails to hold here, then a further decline below $60 is likely,” chief market technician Craig Johnson noted. Semiconductors outperformed on Tuesday, highlighting the risk-on tilt in the market. The Philadelphia Semiconductor Index gained more than 3%.
Eighteen stocks in the S&P 500 traded at new 52-week highs on Tuesday, with 14 names reaching new all-time highs. Notable stocks included companies like Microsoft and Broadcom, which saw substantial gains. Microsoft’s stock price hit another record high, tracking toward its fifth positive session in six.
Shares of Microsoft are now up more than 16% year to date, with a market cap exceeding $3.6 trillion. New York Fed President John Williams stated that the current rate policy is “entirely appropriate” for conditions, expecting inflation to hit 3% this year, while economic growth is forecasted to stay positive but slide to about 1%. Exchange-traded funds tied to metals slid in Tuesday’s session as concerns tied to the conflict in the Middle East cooled off.
Gold ETFs fell more than 2%, while silver ETFs lost about 1.5%. In contrast, the SPDR S&P Oil & Gas Exploration & Production ETF jumped about 1%. JPMorgan rose more than 1% to hit a record high on Tuesday, further reflecting investor optimism amid the current geopolitical and economic landscape.
