The S&P 500 rose for a third straight day on Tuesday as traders hoped for progress in the U.S.-China trade talks taking place in London. The Dow Jones Industrial Average added 105.11 points, or 0.25%, to close at 42,866.87. The S&P 500 gained 0.55% to end at 6,038.81, while the Nasdaq Composite climbed 0.63% to settle at 19,714.99.
U.S. Commerce Secretary Howard Lutnick expressed optimism about the trade discussions, stating, “I think the talks are going really, really well. We’re very much spending time and effort and energy – everybody’s got their head down working closely.” Investors are closely monitoring the talks for signs of a deal that would prevent the implementation of hefty tariffs between the two countries. Stocks have rallied in June as investors remain hopeful about the market’s strength and the ongoing global trade discussions.
Strong corporate earnings and a revival in tech stocks, following several announcements in the artificial intelligence sector, have driven the gains. However, some investors worry that current tariffs could drive inflation higher in the near term, potentially weighing on equities. Mark Malek, chief investment officer at Siebert Financial, noted, “The Fed is concerned that the real inflationary effects have not yet shown up.
Based on the complex collection of tariffs in effect today, we would expect aggregates such as autos, apparel, and foods to show initial signs of tariff-driven inflation.”
HSBC believes that the path of least resistance for global equities is higher for the next three months, with U.S. equities potentially catching up with the rest of the world.
U.S.-China trade talks gain traction
However, the outlook becomes challenging beyond that period due to high valuations and potential future tariff policies.
Morgan Stanley is bullish on Duolingo, believing that investors are underestimating the educational software company’s potential success despite a year-to-date rally of nearly 54%. Analyst Nathan Feather reiterated his overweight rating on the stock, targeting a price of $515, approximately 3% above its recent close. D.A. Davidson maintains its critical view on CoreWeave following a recent financing structure disclosure, illustrating that shareholders might not see immediate returns.
The firm reiterated an underperform rating and set a price target of $36 per share, significantly lower than its recent close of $162.10. An ETF tracking home construction names recorded its best day in nearly a month, rising more than 2% in midday trading. Some of the names leading the fund higher included major construction firms, each rising more than 5%.
Notable movers in the market included Insmed, which surged more than 26% following positive results from a Phase 2b study of a treatment for pulmonary arterial hypertension, and J.M. Smucker, which dropped 13% after missing revenue estimates for its fiscal fourth quarter. Wells Fargo analyst Colin Langan warned that Tesla might face pressure due to weak fundamentals in its core auto business, reiterating an underweight rating and a $120 price target. OpenAI has finalized a deal with Alphabet’s Google Cloud to supply additional computing capacity for its existing infrastructure for training and running AI models, which is expected to bolster OpenAI’s capabilities and further its development endeavors.
