Stocks surge toward records on US-Iran hopes, corporate earnings

US equities pushed closer to record territory on Tuesday as easing geopolitical tensions and upbeat corporate earnings fueled investor optimism, although underlying risks tied to inflation and energy prices remain unresolved.

Wall Street’s main indexes rallied sharply, with the S&P 500 advancing about 1.2% just below its all-time high, while the Nasdaq Composite jumped nearly 2% to extend its longest winning streak since 2021. The Dow Jones Industrial Average also gained roughly 0.7%. US futures are flat as at 6am ET Wednesday and global markets are mixed.

The move higher comes as investors increasingly bet that tensions in the Middle East may cool, with renewed diplomatic efforts boosting sentiment and helping drive a rotation back into risk assets. A further boost came from early earnings reports that have reinforced confidence in corporate fundamentals.

Strong results from major financial firms and growth expectations for S&P 500 companies, now projected to rise 19% this year, have added to the bullish tone.

However, the market’s resilience reflects a delicate balance between optimism and unresolved macro pressures.

Rising oil prices and Treasury yields continue to complicate the outlook as elevated energy costs have kept inflation concerns alive and pushed back expectations for Fed rate cuts, even as equities climb. That’s led some investors to question whether markets are underestimating lingering risks and the potential for long-term disruption.

In the near term, attention is shifting toward whether earnings can justify the rally. First-quarter results are expected to play a decisive role in determining whether equities can break through to new highs or stall near current levels.

Even with the S&P 500 within striking distance of a record, the path forward may depend less on sentiment and more on whether corporate performance can offset persistent inflation pressures and geopolitical uncertainty.