Dow rises nearly 100 points as AI chip stocks rally despite US-Iran tensions

• Semiconductor stocks drove market gains, with Marvell up 9% and Micron up 12%, as AI demand optimism remained strong despite geopolitical uncertainty
• Iran is seeking release of $24 billion in frozen funds during negotiations with the US, while oil prices showed modest reaction with Brent staying under $100 per barrel and WTI around $92
• First-quarter earnings growth expectations surged to 29% year-over-year, and markets now price in an 8.5% probability of a Fed rate hike in July, up from less than 1% a month ago

Market Summary

Market Performance:

U.S. equities advanced Tuesday following the Memorial Day weekend, with the Dow Jones Industrial Average rising 92 points (+0.18%), the S&P 500 gaining 0.54%, and the Nasdaq Composite climbing 0.95%. AI semiconductor stocks led the rally, with Micron surging 12% and Marvell up 9% on renewed AI demand optimism.

Geopolitical Developments:

Markets navigated ongoing U.S.-Iran tensions as negotiations continued after recent U.S. military strikes in southern Iran targeting missile sites. Iran is reportedly seeking release of $24 billion in frozen funds. President Trump indicated talks were "going nicely," while Secretary of State Marco Rubio suggested negotiations could take "a few days." Despite tensions, diplomatic progress appears possible regarding Strait of Hormuz shipping stability.

Energy Markets:

Oil prices reacted moderately to Middle East developments. Brent crude rose 2% but remained below $100 per barrel, while WTI traded around $92. The muted response reflects cautious optimism that negotiations may prevent significant supply disruptions through the critical Strait of Hormuz.

Corporate and Economic Data:

First-quarter earnings growth expectations surged to 29% year-over-year, significantly exceeding prior estimates. Technology stocks, including Pony AI (+4%), benefited from continued AI enthusiasm. Eli Lilly and other major tech names also posted gains.

Federal Reserve Outlook:

Kevin Warsh was sworn in as Fed Chair on Friday. Markets anticipate rates remaining unchanged through most of the year, though July rate hike probability increased to 8.5% from under 1% a month ago. Consumer confidence data released Tuesday will provide insight into how geopolitical tensions and rising gasoline prices affect household sentiment.

Market Implications:

Wall Street continues trading near record highs, supported by strong AI-driven earnings and corporate fundamentals, even as geopolitical and inflation concerns persist.