Optimism on Iran war deal, AI theme push S&P 500 to record close

Equities notched their fourth-straight session of gains on Tuesday, with investors hopeful that an agreement to re-open the Strait of Hormuz may be near even as hostilities tested a ceasefire between the U.S. and Iran.

The S&P 500 Index ended 0.6% higher in New York to hit a fresh record. The tech-heavy Nasdaq 100 Index rose 1.8% to its own record, while the Dow Jones Industrial Average slipped 0.2%.

The market is seeing "solid gains" on expectations of a deal with Iran, as well as "the continued explosion in optimism for all things AI," said Vital Knowledge founder Adam Crisafulli. AI optimism "is driving additional parabolic gains in chip and infrastructure stocks."

Hopes of a peace deal held even after US and Israeli jets struck Iranian targets on Monday, hours after President Donald Trump signaled negotiations with Tehran on an interim agreement were progressing.

Meanwhile, a report on Tuesday showed that U.S. consumer confidence slipped in May as a result of rising prices.

Despite this, "consumers remain bullish on stocks," Neil Dutta, partner and head of economic research at Renaissance Macro Research, wrote in a Tuesday note. Respondents seeing higher equity prices in the next 12 months jumped to their highest level this year.

Semiconductors helped push the S&P 500 higher, with chipmakers among the top performers in the benchmark. UBS raised its price target on Micron Technology Inc., expecting the stock to more than double.

The Philadelphia Stock Exchange Semiconductor Index notched its fifth-straight session of gains and is up around 80% so far in 2026.

West Texas Intermediate oil prices continued to fall Tuesday and were recently around $93 per barrel. Treasury yields slipped but remain elevated as the curve signals a higher-for-longer warning on rates. Morgan Stanley strategists led by Mike Wilson said the stock market can handle higher yields as long as strong economic growth is the main catalyst.

The S&P 500 has rallied 14% since the beginning of April, leaving some on Wall Street to question whether investors have already priced in a peace deal.

"Don't expect an agreement to immediately send the S&P 500 running to 8,000," wrote Tom Essaye, founder of the Sevens Report. Still, he said the end of the war would allow investors to focus on strong earnings growth, which will "increase the rally potential for the market."

Among single-stock movers, AutoZone Inc. is among the worst performers in the S&P 500, plunging after the automotive parts retailer's third-quarter sales missed expectations. Important earnings still to come include Salesforce Inc. on Wednesday and Costco Wholesale Corp. on Thursday.

Investors will also parse personal consumption expenditure data and a GDP reading on Thursday as well as wholesale and retail inventories on Friday.

Sectors in Focus

•Software names may be in play as Salesforce Inc. is due to report results.

•Watch trading in banks on Wednesday with some of Canada's largest financial institutions reporting results, including Bank of Montreal, Bank of Nova Scotia, National Bank of Canada and EQB Inc.

•Homebuilding stocks may move with MBA mortgage application data through May 22 scheduled to be released at 7 a.m. in New York.

-With assistance from Tatiana Darie.

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