US stocks ended mixed on Tuesday as AI-driven optimism supported markets but was offset by rising geopolitical tensions and oil prices. According to The Economic Times, the S&P 500 gained 10.07 points, or 0.13%, to close at 7,610.03 points, while the Nasdaq Composite gained 8.78 points, or 0.03%, to 27,095.59 and the Dow Jones Industrial Average rose 237.13 points, or 0.46%, to 51,316.01. Gains in most of the 11 major S&P sectors kept the S&P 500 and the Dow in positive territory, with the small-cap Russell 2000 outperforming its larger-cap peers. The Philadelphia SE Semiconductor Index advanced on the day, with small-cap stocks benefiting from ongoing AI enthusiasm, while the Software & Services Index closed in negative territory following a strong rebound rally.
Alphabet's shares lost ground on the day after the company announced plans to raise $80 billion through stock sales to fund its artificial intelligence expansion. The fundraising plan includes a $10 billion investment from Berkshire Hathaway, creating significant pressure on the broader technology sector. This sharp decline in the Google parent company weighed heavily on the tech-heavy Nasdaq, which ended essentially unchanged despite gains in other AI-linked stocks. However, **Marvell Technology's shares surged after Nvidia Chief Executive Officer Jensen Huang called the chipmaker the next "trillion-dollar company" at the Computex conference in Taipei. Nvidia invested $2 billion in Marvell in March, with the semiconductor company benefiting from Nvidia's continued AI infrastructure investments.
Investor confidence in AI infrastructure received a significant boost from major technology companies' substantial commitments. Hewlett Packard Enterprise jumped after the AI server maker pulled forward its long-term financial targets by two years, reinforcing confidence in the AI buildout. Strong results from Hewlett Packard Enterprise and Alphabet's funding commitment underscore the market's conviction that AI represents a transformative opportunity for technology companies. "The market is kind of muted at the surface level, but there is a lot going on under the hood, and that describes much of this year," said Mike Dickson, head of portfolio management at Horizon Investments in Charlotte, North Carolina. "There's some massive dispersion in the whole AI infrastructure ecosystem." Dickson added that "Markets could be in for one of these heated, melt-up rallies where the momentum keeps winning."
Oil prices provided significant relief to markets, with Brent crude trading little changed at $95.06 per barrel and West Texas Intermediate up 0.08% to $92.23. However, a report from the Labor Department showed an unexpected spike in job openings, driven by the volatile professional and business services sector. Otherwise, hiring, firing and quits all decreased, suggesting a slowdown in labor market churn in the face of uncertainties related to Middle East strife and inflationary effects. Cleveland Fed President Beth Hammack said on Tuesday that such a hike could become necessary if already-elevated inflation pressures continue to mount. The war has sent crude prices soaring, reviving worries over inflation and giving rise to an increasing likelihood that the U.S. Federal Reserve could hike interest rates by year-end.
Investor sentiment remained cautious amid conflicting signals over US-Iran talks, which kept broader market sentiment uncertain. Iranian media reported that Tehran is studying a U.S. proposal to bring the war to a halt, but has not been in contact with Washington for days, according to The Economic Times. Iran is taking a "stern" approach, given what it views as a history of U.S. noncompliance and mutual distrust. Simultaneously, Israel is continuing its strikes on Lebanon, despite Tehran's warnings that the attacks are threatening to derail the fragile truce. This mixed messaging created uncertainty in markets despite the overall positive AI sector performance. The war has sent crude prices soaring, reviving worries over inflation and giving rise to an increasing likelihood that the U.S. Federal Reserve could hike interest rates by year-end.
International markets showed mixed performance, with Tokyo's Nikkei 225 rising 0.9% to an all-time high and South Korea's Kospi index jumping 3.7% to a record after data showed the country's exports surged 53% in May from a year earlier, buoyed by global demand for semiconductors. However, indexes fell in Europe following a stronger finish in Asia. In the bond market, Treasury yields climbed with oil prices and after a report said growth in U.S. manufacturing accelerated by more last month than economists expected, with the 10-year Treasury yield briefly approaching 4.52% before regressing to 4.46%, up from 4.45% late Friday. Analysts look to the May employment report due on Friday, which is expected to show the U.S. economy added 85,000 jobs last month, a monthly deceleration of 26.1%. The unemployment rate is forecast to stand pat at 4.3%.
