The S&P 500 and Nasdaq hit fresh record highs on optimism over an end to hostilities between the United States and Iran.
The S&P 500 climbed 1.46% to close at 7,365.10 on the New York Stock Exchange on Tuesday, while the tech-heavy Nasdaq surged 2.02% to 25,838.94. The Dow Jones Industrial Average also rose 1.24% to finish at 49,910.59.
Earlier in the day, U.S. online news outlet Axios reported that Washington and Tehran were close to signing a one-page memorandum of understanding (MOU). The MOU is said to include a temporary moratorium on Iran's nuclear enrichment, the lifting of U.S. sanctions against Iran and the partial release of frozen funds, a gradual easing of Iranian restrictions on passage through the Strait of Hormuz, and a phased lifting of the U.S. naval blockade on Iran. President Trump also voiced optimism several times throughout the day. In a PBS interview, Trump said a deal with Iran was imminent and suggested an agreement could be reached before his visit to China on the 14th and 15th.
"We continue on the path toward de-escalation and an end to the conflict," said Michael Brown of Pepperstone. "The path is of course rough, but as long as we stick to this path and the direction we are heading is optimistic, risk appetite will be maintained." His comments suggested that while U.S.-Iran talks to end the conflict will be difficult, risk-on sentiment will persist as long as neither side shows a willingness to clash and both demonstrate a clear intent to compromise.
In individual stocks, U.S. chipmaker AMD surged about 19% after reporting better-than-expected earnings. AMD said the previous day that it posted first-quarter earnings per share of $1.37 on revenue of $10.25 billion, beating market expectations of $1.29 and $9.89 billion, respectively. Intel shares also rose 4.5%, while the Philadelphia Semiconductor Index climbed 4.5%, bringing its year-to-date gain to 62%.
Robust corporate earnings also provided a positive boost. More than 80% of S&P 500 companies that reported results through May 1 beat market profit expectations. "The economy is running smoothly," said Thomas Martin, senior portfolio manager at Global Investments. "There are no warning signs at all that we are getting closer to a recession."
Employment data also came in strong. Automatic Data Processing (ADP), a U.S. employment information firm, said private-sector payrolls rose by 109,000 in April from the previous month. It was the largest increase since January last year and exceeded the consensus forecast of 84,000. Reuters assessed that the figure "shows the labor market continues to be stable despite the war with Iran."
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