Here's a fun thing about markets: sometimes they decide to just ignore the obvious problem. On Tuesday, U.S. stocks decided to extend their rebound, climbing away from four-month lows even as oil prices shot higher again. It seems investors are taking a deep breath, reassessing last week's panic over stagflation, and turning their attention to the main event: the Federal Reserve's rate decision on Wednesday.
In the middle of all this, Micron Technology (MU) stock was having its own party, rallying to record highs ahead of its earnings report Wednesday. The options market was busy pricing in just how big a move traders expect.
Meanwhile, in a different kind of market—the geopolitical one—President Donald Trump made a notable declaration. After most NATO allies reportedly declined to join a U.S. military operation against Iran, Trump stated the United States "does not need the help of anyone." He wrote that America had already "decimated Iran's Military" — their navy, air force, anti-aircraft systems, and leadership "at virtually every level."
Back in the commodity pits, West Texas Intermediate crude climbed 1.5% to $94.90 a barrel. Brent crude crossed back above $101, neatly reversing Monday's brief relief rally in energy markets. The catalyst? Overnight, Iran escalated attacks on energy infrastructure in the Persian Gulf. Adding to the tension, Israel reported killing Iran's security chief—a stark reminder that this conflict is far from over.
All of this creates a messy backdrop for the Federal Reserve, which kicked off its two-day policy meeting Tuesday. No one expects a change to the current 3.75% fed funds rate on Wednesday. The real action will be in the updated Summary of Economic Projections—the famous "dot plot." Policymakers are now tasked with modeling the economic impact of these surging energy prices on both growth and inflation. It's a tricky puzzle.
The market's current bet? Just one 25-basis-point rate cut, and no earlier than December. Reflecting this cautious calm, the 10-year U.S. Treasury yield edged down nearly 2 basis points to 4.20%. The 30-year yield settled at 4.85%.
By midday in New York, the mood was cautiously optimistic. The S&P 500 rose 0.4% to 6,722 points, while the Nasdaq 100 slightly outperformed the broader market.
Tuesday's Performance In Major U.S. Indices
| Major Indices | Price | % Change |
|---|---|---|
| Nasdaq 100 | 24,802.00 | +0.59% |
| S&P 500 | 6,722.02 | +0.34% |
| Dow Jones | 47,117.00 | +0.36% |
| Russell 2000 | 2,511.31 | +0.32% |
Updated by 12:30 p.m. ET
The ETF market mirrored the gains:
- The Vanguard S&P 500 ETF (VOO) rose 0.34%.
- The SPDR Dow Jones Industrial Average (DIA) rose 0.36%.
- The tech-heavy Invesco QQQ Trust Series (QQQ) rallied 0.59%.
- The iShares Russell 2000 ETF (IWM) traded 0.32% higher.
Asset Managers Surge On Private Credit Reassessment
The financial sector was Tuesday's star performer. The Financial Select Sector SPDR Fund (XLF) led all 11 S&P 500 sectors, gaining 1.4%. The rally appeared driven by traders walking back last week's fears over potential defaults in large private-sector software loans. It was a classic "maybe it's not so bad" rebound.
Big asset managers led the charge, staging some of the sharpest recoveries among large-cap financials:
These stocks all jumped between 3% and 6%.
In tech land, Qualcomm Incorporated (QCOM) gained 3% after announcing a higher dividend and a new $20 billion share buyback program. In a volatile environment, that's a pretty confident show of capital strength.
NVIDIA Corporation (NVDA) inched lower, however, despite bullish remarks from CEO Jensen Huang. Speaking at the company's GTC 2026 conference in San Jose, Huang projected that Nvidia will generate a staggering $1 trillion in AI chip revenues by 2027. Sometimes even a trillion-dollar forecast isn't enough for the market on a given day.
Unsurprisingly, energy stocks were strong. The Energy Select Sector SPDR Fund (XLE) climbed 1.6% as fuel prices continued their rally. According to the American Automobile Association, the average price for a gallon of diesel crossed $5 for the first time since 2022. Goldman Sachs added a worrying note, warning that the supply disruption in fuels is even worse than the one in the oil market itself.
On the lagging side, the Health Care Select Sector SPDR Fund (XLV) underperformed, falling 0.6%. The move followed HSBC downgrading Eli Lilly (LLY) from 'Hold' to 'Reduce' and slashing its price target from $1,070 to $850. The bank pointed to expected headwinds in the obesity-drug market and growing pricing pressure.
