Topline
Stocks rallied again Tuesday to near record highs, showing significant resilience against a challenging backdrop of high geopolitical tensions, historic tariffs, elevated interest rates and recession angst.
Wall Street is showing faith even amid “unusually elevated” uncertainty.
The S&P 500, the most commonly cited measure of the U.S. stock market, rose 0.8% shortly after 10 a.m. EDT, building on Monday’s near 1% gain as investors embraced apparently easing tensions between Iran and Israel after the U.S. struck Iran.
This week’s advance followed optimism Iran would not close the crucial oil passageway of the Strait of Hormuz, according to Yardeni Research founder Ed Yardeni, as prices for international oil benchmark Brent crude tumbled 5% to $67 per barrel, a near two-week low.
The S&P hit its highest level Tuesday since Feb. 21, at nearly 6,080, sitting within 1% of the all-time closing high set in February.
Also rallying Tuesday were the blue chip Dow Jones Industrial Average, which rose 0.7% (290 points) to a two-week high, and the tech-heavy Nasdaq, which jumped 1.1% to a four-month high.
More than 20%. That’s how much the S&P is up from its April nadir, set just before Trump backtracked on his most severe “Liberation Day” tariffs.
Economic uncertainty is “unusually elevated,” said the U.S.’ top policymaker Jerome Powell last week, evoking what’s typically a dog whistle term for Wall Street, which hates uncertainty as it upends valuation models. But despite persistent warnings of an economic slowdown and higher inflation tied to tariffs, and survey data indicating consumer sentiment falling below 2008 levels, the stock market is still trading at robust levels. As for the positive shift in the market, Goldman Sachs economists Ronnie Walker and David Mericle explained in a Monday note to clients many investors “are only willing to trust the hard data” before turning bearish. Wells Fargo strategist Chris Haverland added deregulation, tax cuts and lower interest rates could “more than offset” the negative effects of tariffs for stocks.
Big-name stocks including the world’s most valuable company Microsoft and the U.S.’ biggest bank JPMorgan Chase set new record share prices Tuesday. Also rising were shares of artificial intelligence giants Amazon, Meta and Nvidia, all of which enjoyed about 2% gains.
The S&P is up 1% since Trump’s second term began in January, excluding dividends, taking a rocky and volatile path to the mundane return. After a solid first month, stocks began to slide as Trump rolled out far higher trade barriers than expected, eventually bottoming in April following Trump’s announcement which set the average effective tariff rate to a more than 100-year high of 23%. That average import tax has since rolled back to 13%, according to JPMorgan’s calculations, opening the door for renewed investor bullishness, as recent inflation data has yet to show much impact on consumer prices from tariffs, though it’s still early days.