Global markets rallied on Tuesday, driven by tentative hopes for a U.S.-Iran peace deal, despite ongoing geopolitical tensions and U.S. strikes in southern Iran. Technology stocks, including Micron and its peers, surged on strong analyst sentiment, while oil prices saw mixed reactions with Brent crude rising and WTI futures falling. Analysts emphasized underlying earnings growth as a key driver for the market’s ‘fabulous earnings momentum’.
U.S. equity markets kicked off a holiday-shortened week with significant gains on Tuesday, fueled by cautious optimism surrounding a potential peace deal between the United States and Iran. Technology stocks led the rally, propelling major indexes to new highs amidst a complex geopolitical landscape and fluctuating commodity markets.
The S&P 500 advanced 0.8%, with the tech-heavy Nasdaq Composite jumping 1.3%. Both indexes achieved new all-time intraday highs. The Dow Jones Industrial Average, after an initial surge in futures, traded near the flatline. U.S. markets were closed Monday for Memorial Day.
Semiconductor stocks were a major highlight, with Micron Technology soaring 15%. Analysts expressed significant bullishness, with UBS projecting more than 100% upside due to long-term agreements. Other memory chip names, Seagate Technology and Western Digital, also saw substantial gains of 3% and 8% respectively. The Roundhill Memory ETF (DRAM), a rapidly growing fund, added a remarkable 12% and hit a new 52-week high, surging 59% over the past month. Sandisk also advanced 7%.
Meanwhile, FedEx Corporation received a bullish outlook from Wells Fargo analysts, who set a $450 price target, expecting a 14.2% climb over the next year. The optimism stems from anticipated tailwinds for FedEx Freight and the potential for a compelling valuation post-spin, addressing previously restrained pricing power.
President Donald Trump announced Monday that U.S.-Iran talks were "proceeding nicely," although he cautioned of potential offensive action if negotiations falter. Despite this, the U.S. Central Command confirmed "self-defense" strikes in southern Iran early Tuesday, targeting missile launch sites and Iranian boats attempting to place mines. These actions, described as showing "restraint during the ongoing ceasefire," created volatility in oil markets.
U.S. crude futures, West Texas Intermediate for July, traded 2% lower at $93 per barrel after the strikes, coming off earlier lows. Conversely, international benchmark Brent crude jumped 4% to $100 per barrel, reflecting continued global supply concerns and geopolitical tension. Treasury yields also reacted, with the 10-year U.S. Treasury note falling over 8 basis points to 4.485%, as bond markets reopened with bolstered hopes for a Middle East peace deal.
Corporate news saw BP shares drop sharply after its board removed Chairman Albert Manifold due to "serious concerns" over governance and conduct. Conversely, Lear Corp. gained 2% following a 'buy' upgrade from TD Cowen, citing strong positioning in North American auto production. Ferrari shares, however, fell 3% after the unveiling of its first fully electric vehicle, the Luce, priced around $640,000, disappointing some traditional supercar enthusiasts.
Market analysts weighed in, with Adam Crisafulli of Vital Knowledge noting the consensus view of an imminent U.S.-Iran détente and questioning how much of this is already priced in. Adam Parker of Trivariate Research highlighted strong market fundamentals, citing projected earnings growth of 23% this year and 16% next, which he believes supports the rally despite contracting price-to-forward earnings ratios. Ed Yardeni, founder of Yardeni Research, coined the term "FEMO" (fabulous earnings momentum) to describe the current market, contrasting it with "FOMO" and emphasizing the rally's foundation in fundamentals rather than hype.
Globally, Asian markets closed mixed, with South Korea's Kospi hitting a fresh record high, while Japan's Nikkei 225 saw some profit-taking. China's CSI 300 gained, and Australia's S&P/ASX 200 fell. India's Nifty 50 and BSE Sensex also declined.
