The Dow Jones Industrial Average climbed more than 300 points on Tuesday, putting it on course for a record closing high for the second day in a row. The S&P 500 and Nasdaq both dipped slightly, hovering just below the flat line.
Monday’s rally was fueled by a US-Iran peace deal that raised hopes the Strait of Hormuz would reopen. But those hopes are cooling fast.
President Trump posted on social media that ships should “start your engines” ahead of a promised Friday reopening of the strait. However, analysts warn the path back to normal is not that simple.
David Rosenberg of Rosenberg Research said it could take up to six months to normalize oil traffic through the waterway. That means energy-related disruptions to the economy are unlikely to be resolved quickly.
Despite lower oil prices on Tuesday, bond yields remained elevated. The 10-year Treasury yield held near 4.46%, and the 2-year yield sat at around 4.08%.
Some market watchers see the stubbornly high yields as a sign that investors are focused on what comes next from the Federal Reserve, not just the Iran situation.
Fed officials began their June meeting on Tuesday. A rate decision is expected Wednesday afternoon — the first press conference under Chair Kevin Warsh, who was backed by President Trump.
The Fed is widely expected to hold rates steady. But many on Wall Street are watching the “dot plot” closely for any signs that rate hikes could be coming later in the year.
Recent inflation data has come in hotter than expected. The conflict in Iran pushed energy prices higher, keeping upward pressure on prices.
Jonathan Krinsky of BTIG noted that markets often “test” new Fed chairs. He flagged the 30-year Treasury yield as one to watch, warning that a move above 5.05% could signal growing market pressure on Warsh.
The Bank of Japan also raised its benchmark interest rate on Tuesday to a 31-year high, citing rising price pressures.
SpaceX shares rose for a third straight day following the company’s IPO. The Elon Musk-led company is now approaching Amazon’s market value.
If SpaceX overtakes Amazon, it would become the fifth-largest company in the world by market cap. The stock opened higher on Tuesday, continuing its post-IPO momentum.
The Dow’s gains came as oil prices fell and investors shifted focus to the Fed meeting ahead. As of Tuesday morning, the Dow was up around 0.6%, with any closing gain setting a new all-time high.
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