By Saeed Azhar, Twesha Dikshit and Utkarsh Hathi
May 26 (Reuters) – The S&P 500 and the Nasdaq traded near record levels on Tuesday, after briefly hitting fresh intraday highs, as AI-fueled optimism offset concerns over Middle East peace talks, which were compounded by recent U.S. strikes on Iran.
Semiconductor stocks, which have surged on AI-driven demand, led gains, with Micron jumping more than 19%, hitting $1 trillion in market value for the first time after UBS increased its price target on the stock to $1,625 from $535.
Upbeat earnings and renewed confidence in AI trade have driven U.S. equities higher despite the ongoing conflict with Iran, with investors now turning their attention to IPOs of some of the largest private AI companies, including SpaceX.
“For those of us that have been working that long, the tech rallies we’ve been seeing this year are reminiscent of the boom at the end of the 1990s,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management.
“It’s also possible that some of the lessons that were learned after the tech bubble burst over 25 years ago will prevent the same thing from happening again.”
The market took comfort from comments by U.S. Secretary of State Marco Rubio, who said that a deal with Tehran to halt the conflict could “take a few days,” while Iran’s Tasnim news agency reported that Tehran was seeking the release of $24 billion of Iranian funds frozen overseas.
“Even though we don’t have an end of the war yet, there’s a very high likelihood the situation will resolve itself in a peaceful fashion sooner rather than later,” said Adam Sarhan, chief executive of 50 Park Investments.
“But the reality is that earnings are expected to grow even with high inflation. The economy is still growing, and the market is a mirror of the economy to a large extent.”
At 2:13 p.m. EDT, the Dow Jones Industrial Average fell 175.28 points, or 0.35%, to 50,404.42, the S&P 500 gained 40.23 points, or 0.54%, to 7,513.70 and the Nasdaq Composite gained 265.39 points, or 1.01%, to 26,609.36.
The S&P 500, the Nasdaq and the Russell 2000 touched intraday record highs on Tuesday, underscoring the strength of the recent rally.
Brent crude futures climbed about 4% on Tuesday after the U.S. military carried out strikes in Iran, adding to uncertainty over whether a deal would be reached soon to end the war and open up shipping flows through the Strait of Hormuz.
Qualcomm rose 3.6% after Bloomberg News reported it reached a deal with TikTok owner ByteDance to supply chips, while Marvell Technology rose 6%. The Philadelphia SE Semiconductor Index rose 5% to an all-time high.
The S&P 500 information technology subindex was leading gains with a rise of 1.5%.
With the earnings season winding down, first-quarter earnings growth is expected to be 29% year-on-year compared with the 16.1% estimated a month ago, according to LSEG data from Friday.
Advancing issues outnumbered decliners by a 2.27-to-1 ratio on the New York Stock Exchange. There were 504 new highs and 82 new lows on the NYSE.
On the Nasdaq, 3,040 stocks rose and 1,761 fell as advancing issues outnumbered decliners by a 1.73-to-1 ratio.
The S&P 500 posted 40 new 52-week highs and one new low while the Nasdaq Composite recorded 174 new highs and 65 new lows.
(Reporting by Saeed Azhar in New York and Twesha Dikshit and Utkarsh Hathi in Bengaluru; Editing by Shinjini Ganguli and Matthew Lewis)
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