Upbeat earnings and renewed confidence in AI trade have driven U.S. equities higher despite the ongoing conflict with Iran. Investors are now turning their attention to IPOs of some of the largest private AI companies, including SpaceX, as the market shows resilience in the face of geopolitical tensions.
The S&P 500 gained 46.00 points, or 0.62%, to end at 7,519.47 points, while the Nasdaq Composite rose by 311.92 points, or 1.18%, to 26,655.89. However, the Dow Jones Industrial Average saw a decline of 106.60 points, or 0.21%, to 50,473.10. 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 following U.S. military strikes in Iran, adding uncertainty over whether a deal would soon be reached to end the conflict and reopen shipping flows through the Strait of Hormuz. Meanwhile, Qualcomm shares rose after Bloomberg News reported a deal with TikTok owner ByteDance to supply chips, and Marvell Technology also ended higher. The Philadelphia SE Semiconductor Index hit an all-time high.
“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.”
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management
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. This growth is anticipated despite high inflation, as the economy continues to expand.
"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 suggested 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.
Background
The current market rally is reminiscent of the late 1990s tech boom, driven by optimism in AI advancements and robust earnings growth. The geopolitical tensions with Iran add a layer of uncertainty, but investor confidence remains buoyed by potential resolutions and strong economic indicators.
Looking ahead, market participants will closely monitor developments in the Iran conflict and the upcoming IPOs of major AI companies. The potential for a peaceful resolution with Iran and continued earnings growth could sustain the positive momentum in U.S. equities.
