S&P 500: New highs eyed on US-Iran hopes and AI hype
S&P 500: New highs eyed on US-Iran hopes and AI hype
Wall Street continued to push higher over the last 24 hours as improving sentiment surrounding a potential US-Iran agreement helped fuel another wave of risk appetite across global markets. Yesterday, saw the S&P 500 climbed to a fresh record territory, supported by strength in technology stocks and a softer energy backdrop, although volatility in crude oil suggests traders are far from convinced that geopolitical risks have fully disappeared.
Still, S&P 500 futures were edging slightly higher, suggesting the positive momentum remained in play.
Deal or no deal?
Markets are continuing to lean heavily into the risk-on narrative as hopes grow that the US and Iran could eventually reach some form of agreement, even if major nuclear discussions are pushed further down the road. Reports that Tehran is reviewing a US proposal, combined with Donald Trump’s optimistic remarks ahead of his meeting with Xi Jinping, helped fuel another wave of dollar selling while equities pushed higher globally. Falling crude oil prices have been a key driver behind the rally, easing concerns about inflation and reducing fears of a major supply shock through the Strait of Hormuz. That has also reinforced expectations that the Federal Reserve may have greater room to ease policy later this year, supporting both growth stocks and broader market sentiment. At the same time, recent economic data has remained resilient enough to calm recession fears, leaving investors increasingly confident that geopolitical tensions will cool without causing meaningful economic damage. The challenge now is that markets appear to be pricing in a near best-case scenario, which leaves sentiment vulnerable if negotiations stall or tensions unexpectedly flare up again.
Chipmakers continue driving Wall Street higher
Technology stocks, especially semiconductor names, remain at the centre of the rally on Wall Street. Positive earnings momentum from companies tied to the AI investment boom has helped keep buyers firmly engaged despite elevated valuations.
The broader belief that the AI spending cycle remains durable continues to provide a powerful anchor for the market. Investors have largely been willing to overlook stretched valuations as long as earnings growth remains strong and macroeconomic conditions avoid a sharp deterioration.
That said, investors are pricing in perfection. Markets are already trading near historically expensive levels, meaning incoming data and corporate earnings will likely need to continue meeting elevated expectations to sustain momentum.
Can the rally continue?
For now, momentum remains with the bulls. Softer oil prices, resilient economic data and continued enthusiasm surrounding AI have created a powerful combination for equities. However, the next major move may depend heavily on geopolitical developments over the coming days.
If negotiations between the US and Iran stall without clear progress, markets could quickly reverse some of the recent optimism. In that scenario, crude oil prices may rebound aggressively again, the dollar could recover further, and profit-taking in equities may accelerate.
For the moment though, the S&P 500 chart remains positive, even if markets are beginning to look increasingly stretched after another strong rally.
Some upside targets include the 161.8% Fibonacci extension level of the last significant downswing we saw between January to March, at 7470, while the next round handle of 7500 is another obvious bullish target. Initial support is now seen at 7300/5 area. Lose that, 7220/30 area comes into focus, followed by the prior all-time high at 7043 and then the psychological level 7000.
Trader | Analyst | TradingCandles.com
e: Fawad.Razaqzada@TradingCandles.com
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