U.S. stock indexes rallied broadly on Tuesday, with the S&P 500 up 1.62%, the Dow Jones Industrial Average gaining 1.09% and the Nasdaq 100 rising 2.73%, as investors shifted into risk-on positioning. The move came as crude oil prices and global bond yields fell, supported by news that the U.S. and Iran agreed to end their war and reopen the Strait of Hormuz.
June E-mini S&P futures were up 1.61% and June E-mini Nasdaq futures gained 2.65%, reflecting strength in equity futures that tracked the session’s jump. Technology shares led the advance, while lower oil boosted energy-sensitive sectors such as airlines; however, weaker-than-expected U.S. manufacturing indicators added pressure elsewhere.
Key takeaways
- Price move: The S&P 500 rose 1.62% and the Nasdaq 100 climbed 2.73%.
- Catalyst: A risk-on shift followed the U.S.-Iran agreement to end hostilities and reopen the Strait of Hormuz, sending oil and yields lower.
- Sector impact: Technology and AI infrastructure led, while energy stocks fell as WTI crude dropped more than 5%.
- Data counterweight: The U.S. Empire manufacturing survey and May manufacturing production came in weaker than expected.
- Implication: Lower inflation expectations and falling yields supported duration-sensitive parts of the market, but oil-linked earnings risk remains.
What drove the stock rally
The day’s largest macro driver was the oil complex, which in turn helped equities. WTI crude fell more than 5% to a 3-month low after the reported end of the U.S.-Iran war and expectations that the Strait of Hormuz will reopen. President Trump said the strait would reopen after a peace deal is signed in Switzerland on Friday, and that the agreement would begin 60 days of talks on Iran’s nuclear program. The potential for renewed military action if nuclear negotiations fail was also flagged in the reporting.
With energy prices sliding, inflation expectations eased and global government yields declined—an environment that typically supports equity valuations, particularly for growth and technology stocks. The report also noted that weaker U.S. economic prints were a partial drag, but the market appeared to weigh the rates-and-oil relief more heavily.
Market reaction across rates, oil and sectors
Rates: The 10-year U.S. Treasury yield dropped by 3.02 basis points to 4.449% after falling toward a 1-month low of 4.418%. The session’s report also said September 10-year Treasury futures were higher, with gains attributed to the combination of lower oil prices, reduced inflation expectations, and weaker U.S. data.
Energy: Lower crude weighed on energy producers. Several major names were reported down more than 3% to 5%, including Exxon Mobil, ConocoPhillips, Occidental Petroleum and Valero Energy. In the broader tape, the report characterized energy and related service providers as lagging as WTI fell to levels seen over the last three months.
Technology and AI infrastructure: Technology leadership was central to the rally. The report cited gains among chipmakers and AI infrastructure names, with the iShares Semiconductor ETF rising more than 4% to a new record high. Western Digital was reported up more than 15%, helping drive momentum across the S&P 500 and Nasdaq 100, alongside advances in Micron Technology, Advanced Micro Devices and Seagate Technology.
Airlines: Airline stocks climbed as the crude selloff reduced fuel cost pressure. Alaska Air Group and Royal Caribbean Cruises were each reported up more than 6%, while United Airlines and Carnival gained more than 5%.
Metals and mining: The report said metal prices were higher and mining shares rallied, citing strength in gold, silver and copper as oil’s decline became viewed as “dovish” for central banks. Examples included Hecla Mining up more than 10% and Coeur Mining up more than 9%.
Cryptocurrency-linked equities: Stocks with crypto exposure also benefited. The report linked the gains to Bitcoin rising more than 4% to a 1.5-week high, lifting names such as MARA Holdings and Strategy.
Data and policy expectations in focus
Despite the risk-on impulse, the session included pockets of caution from economic releases. The report said the U.S. Empire manufacturing survey of general business conditions fell 13.9 points to 5.7, worse than the 13.7 reading expected. It also said May manufacturing production was flat month over month, below expectations for a 0.3% increase.
Market-implied policy expectations also featured in the move. The report said markets were pricing a 4% chance of a 25 basis point rate hike at the next FOMC meeting on June 16–17. In Europe, it said swaps implied a 17% chance of a 25 basis point ECB rate hike at the July 23 meeting.
The report also referenced ECB communication from Governing Council member Martins Kazaks, who said the ECB raised its inflation forecast significantly but viewed the upside risks for inflation as still present, adding that the ECB was ready to take further action to prevent energy price pressures from spreading to the rest of the economy.
Global equities add confirmation
Overseas markets were also higher, reinforcing the broad-based risk tone. The report said the Euro Stoxx 50 reached a new record high and was up 1.12%, China’s Shanghai Composite rose to a 1.5-week high and ended up 1.61%, and Japan’s Nikkei-225 Stock Average surged to an all-time high and closed up 4.99%.
What to watch next
Investors are likely to focus on whether oil’s decline holds and how it continues to feed into inflation expectations and Treasury yields. Attention will also turn to the next set of scheduled market catalysts, including the June 16–17 FOMC meeting and upcoming economic data releases, as the combination of geopolitics, energy pricing and U.S. growth signals remains central to how equities are being repriced.
