U.S. stocks maintained their upward momentum in early trading on Tuesday. Chip stocks continued their rebound for a second consecutive day following last Friday's sharp decline, while crude oil prices retreated on market expectations of an imminent U.S.-Iran agreement.
The Dow Jones Industrial Average rose 426.02 points, or 0.84%, to 51,212.03. The Nasdaq Composite gained 219.88 points, or 0.85%, reaching 26,149.55. The S&P 500 index advanced 56.90 points, or 0.77%, to 7,462.63.
Micron Technology shares rose approximately 2% in early trading, extending Monday's 10% rebound. The stock had fallen about 20% over the two sessions preceding last weekend, including a 13% plunge on Friday.
The iShares Semiconductor ETF climbed 2%, following a 6% rebound on Monday. The ETF had plummeted 10% last Friday, marking its worst single-day performance in six years, as investors grew concerned that the artificial intelligence-driven rally in chip stocks had become too rapid and excessive.
West Texas Intermediate crude futures fell more than 2%, trading below $90 per barrel. This decline followed comments from former U.S. President Donald Trump suggesting that an agreement between the U.S. and Iran could be reached "within two or three days," which would "immediately" open the Strait of Hormuz.
Despite a series of attacks between Israel and Iran this week, former President Trump attempted to reassure markets that a U.S.-Iran deal was days away.
Trump told reporters Monday evening that a deal to end the war with Iran could be reached "within two or three days," after which the Strait of Hormuz would open "immediately." He has repeatedly stated that an agreement with Tehran to reopen the strait is close, though such a deal has yet to materialize.
The Iranian Foreign Ministry stated on Monday that Iran had suspended military strikes against Israel but warned that attacks would resume if Israeli military operations in Lebanon continued. Hours later, Israeli Prime Minister Benjamin Netanyahu stated that the conflict with Iran and Hezbollah was "not over."
In Asian markets, Japan's Nikkei 225 index rose over 2%, closing at 65,416.63. South Korea's KOSPI index rebounded sharply from Monday's plunge, surging 8.18% to close at 8,096.93. Hong Kong's Hang Seng Index edged up 0.15%, while mainland China's CSI 300 index gained 1.87% to 4,801.81. Australia's benchmark S&P/ASX 200 index fell 0.24%, closing at 8,604.2.
During Monday's regular session, chip stocks led the gains for the S&P 500, which rose 0.3%. The tech-heavy Nasdaq Composite advanced 0.86%. Both indices recovered some of the losses incurred during last week's tech sell-off. The blue-chip Dow Jones Industrial Average, however, bucked the trend, falling 80.77 points, or 0.16%.
Although the artificial intelligence and chip sectors have been key market drivers on Monday and in recent sessions, Brian Kersmanc, a portfolio manager at GQG Partners, expressed skepticism about the sustainability of this trend.
Kersmanc stated, "The long-term question for the AI and chip sector is sustainability. How long can this momentum realistically last over the long term?"
The portfolio manager added, "Ultimately, many of these chip stocks are commodities. If you look at them from a commodity perspective—when prices rise rapidly, as they have in some areas of memory chips, increasing 15-fold over the past year or so—if I were to draw an analogy... if energy prices rose 15-fold, from $60 to $900 per barrel, how many energy stocks would people be buying now?"
The artificial intelligence sector received a further boost from OpenAI's confidential IPO filing late Monday. SpaceX, active in aerospace and AI, is set to go public on Friday in what is expected to be the largest IPO in history. Some view this listing as potentially adding fuel to the AI-driven bull market, while other investors worry that the company's $1.75 trillion valuation could also signal a peak for this trend.
On the economic data front Tuesday, the U.S. trade deficit has shrunk by approximately half in the year since former President Donald Trump announced his "Liberation Day" tariff policy.
The U.S. Commerce Department reported Tuesday that the total goods and services trade deficit for April was $55.9 billion. This brings the year-to-date deficit down by $213.5 billion compared to the same period last year, a decrease of 49%. The deficit for the month was $7 billion lower than in March and also below the $56.1 billion forecast in a Dow Jones survey.
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