In early trading hours on May 27, Beijing time, both the S&P 500 and the Nasdaq Composite indices reached new all-time highs on Tuesday, buoyed by expectations of U.S.-Iran peace talks and a strong rally in technology stocks. Optimism among investors regarding a potential agreement to end the conflict fueled a resurgence in risk appetite.

At the close, the Dow Jones Industrial Average fell 118.02 points, or 0.23%, to 50,461.68. The Nasdaq Composite surged 312.21 points, or 1.19%, to 26,656.18, while the S&P 500 gained 45.66 points, or 0.61%, to 7,519.13. Both the Nasdaq and the S&P 500 achieved new intraday record highs. U.S. markets were closed on Monday for the Memorial Day holiday.

Chip stocks soared, with Micron Technology leading the charge as its market capitalization surpassed the $1 trillion mark following a 19.9% surge in its share price. Wall Street analysts are broadly optimistic about the company's prospects, with UBS notably bullish, suggesting that long-term agreements could drive the stock price to more than double. Despite a sell-off in the memory chip sector earlier last week, Micron Technology ended the week with significant gains.

Inspired by Micron Technology, other memory chip stocks also advanced. Seagate Technology rose 4%, and Western Digital climbed 8%. The Roundhill Memory ETF (DRAM) jumped 15%, reaching a new record high.

On the geopolitical front, negotiations to end the conflict with Iran are reportedly "progressing well," according to a statement from the U.S. President on Monday. However, he cautioned that the U.S. might take offensive action if the talks break down.

Tensions persist, as the U.S. military announced earlier Tuesday that it had conducted "self-defense" strikes in southern Iran, targeting missile launch sites and Iranian vessels attempting to lay mines. A spokesperson for U.S. Central Command stated that restraint was maintained during the "ongoing ceasefire" between the two nations.

This news caused U.S. crude oil prices to move off their lows during the session. West Texas Intermediate crude for July delivery settled nearly 3% lower at $93.89 per barrel, while Brent crude rose 3% to close at $99.58 per barrel.

Market sentiment reflects a mix of optimism and caution. According to the Chief Investment Officer at LNW, investors appear "morbidly optimistic" that the war is nearing an end and that conditions will return to pre-conflict norms. He noted that the market is in a "tug-of-war": on one side, investors believe in the capital expenditure wave driving markets higher, while on the other, the U.S. economic foundation "remains relatively fragile," and inflation "may be becoming systemic."

The decline in oil prices last week contributed to the stock market's rise, with U.S. crude posting its worst weekly performance since April 17. The S&P 500 gained 0.9% last week, marking its longest weekly winning streak since late 2023. The Dow rose 2.1%, its third weekly gain in four weeks, and the Nasdaq advanced 0.5%, its seventh weekly increase in eight weeks.

However, crude oil prices remain significantly higher than at the start of the year, keeping price pressures elevated. Consequently, investor expectations for the Federal Reserve to ease monetary policy have cooled. The CME FedWatch Tool indicates that traders now assign approximately a 13% probability to a rate hike in July, compared to just 0.9% a month ago.