Wall Street hits a record as S&P 500 continues its 2-week rally on hopes for the Iran war

U.S. stock market rallied to a record high Wednesday, extending a two-week upward trend fueled by optimism that the conflict between the United States and Iran won’t severely disrupt the global economy. The S&P 500 rose 0.8%, breaking its previous all-time high set in January and completing a remarkable recovery after falling nearly 10% below that record in late March.

The rebound comes amid promising diplomatic developments in the Middle East. Regional officials told The Associated Press that the U.S. and Iran had reached an “in principle agreement” to extend a ceasefire to allow for further negotiations. This potential de-escalation has alleviated concerns about oil supply disruptions from the Persian Gulf, which had previously threatened global economic stability.

Market observers caution that the rally could quickly reverse if diplomatic efforts falter, as has happened previously during this conflict. Oil prices, while still elevated compared to pre-war levels, have retreated significantly from their peaks. Brent crude, the international benchmark, settled at $94.93 per barrel on Wednesday, up just 0.1% for the day but well below its wartime high of $119.

While the S&P 500 and Nasdaq composite gained 0.8% and 1.6% respectively, the Dow Jones Industrial Average dipped slightly, losing 72 points or 0.1%.

Corporate earnings have provided additional support for the market’s positive momentum. Bank of America rose 1.8% after reporting first-quarter profits of $8.6 billion, exceeding analyst expectations. CEO Brian Moynihan highlighted signs of a “resilient American economy,” including robust consumer spending. Similarly, Morgan Stanley jumped 4.5% following better-than-anticipated quarterly results.

Companies previously hurt by concerns about artificial intelligence technology showed strong rebounds. ServiceNow climbed 7.3%, Oracle rose 4.2%, and Ares Management gained 5.9%, though all remain down between 12% and 39% year-to-date. Earlier worries had centered on potential excessive spending on AI infrastructure and competitive disruption of existing business models.

One of the day’s most dramatic moves came from footwear company Allbirds, which surged an astonishing 582% to nearly $17 after announcing a strategic pivot to AI compute infrastructure and rebranding as NewBird AI. The company has already agreed to sell its shoe brand to American Exchange Group.

Nike shares rose 2.8% following news that CEO Elliott Hill and board director Tim Cook (who also serves as Apple’s CEO) each purchased approximately $1 million worth of the company’s stock. Despite this vote of confidence, Nike remains down nearly 29% this year.

On the negative side, Live Nation Entertainment fell 6.3% after a jury determined that the concert giant and its Ticketmaster subsidiary maintained a harmful monopoly over major concert venues.

Market analysts suggest that with stock prices returning to January levels while corporate profit forecasts have improved, many equities now appear more attractively valued than earlier in the year. “Today, we see compelling opportunity potential” to shift into areas of the market that look like better buys than earlier this year, according to Mason Mendez, investment strategy analyst at Wells Fargo Investment Institute.

International markets showed mixed performance, with European indices recording modest gains alongside most Asian markets. South Korea’s Kospi stood out with a 2.1% increase. In the U.S. bond market, the yield on the 10-year Treasury edged up slightly to 4.28% from 4.26% the previous day.

As investors continue to monitor diplomatic developments in the Middle East, attention is gradually shifting back to fundamental drivers of stock performance, particularly corporate profits and economic indicators that had propelled markets before the conflict erupted.