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Investing.com-- The S&P 500 closed higher Tuesday, underpinned by de-escalating Middle East tensions amid an Iran-Israel ceasefire and remarks by Federal Reserve chairman Jerome that kept the door open to rate cuts.
By 4:00 p.m. ET (20:00 GMT), the Dow Jones Industrial Average traded 507 points, or 1.2%, higher, the S&P 500 index gained 1.1%, and the NASDAQ Composite advanced 1.4%.
Iran-Israel ceasefire optimism boosts Wall Street
Investors have been boosted by U.S. President Donald Trump declaring earlier Tuesday, via social media, that the ceasefire between Israel and Iran is now "in effect," adding that neither side should violate it.
The statement has lifted expectations that the 12-day bout of fighting that included deadly air strikes has now come to an end.
Oil prices plunged as the prospect of lasting ceasefire removed the risk premium from potential supply disruption that had been priced into crude as well as fears about a step up in global inflation.
Still, questions surrounded the longevity of the ceasefire, Trump has already sharply rebuking Israel for its military response, accusing both Israel and Iran of violating the agreement just hours after he announced it.
"I didn’t like the fact that Israel unloaded right after we made the deal. They didn’t have to unload and I didn’t like the fact that the retaliation was very strong," Trump told reporters on Tuesday.
Israeli Defence Minister Israel Katz said he had ordered the military to mount new strikes on targets in Tehran in response to what he said were Iranian missiles fired in a "blatant violation" of the ceasefire.
Iran denied launching any missiles and said Israel’s attacks had continued for an hour and a half beyond the time the ceasefire was meant to start.
Powell signals Fed keeping options open; Treasury yields drop
Federal Reserve Chair Jerome Powell’s said in testimony before the Semiannual Monetary Policy Report to Congress that many paths are possible” for monetary policy, signaling that rate cuts remained on the table.
The remarks come in the wake of the Fed’s so-called hawkish pause on rates last week, when the central bank’s projections showed fewer rate cuts in 2026.
In recent days two Fed governors, both Trump appointees, have said rates could fall as soon as the July meeting given inflation has not yet risen in response to tariffs, while Trump has repeatedly called for steep rate cuts.
"We should be at least two to three points lower," he said in a social media post ahead of the hearing, adding in reference to Powell that he hoped "Congress really works this very dumb, hardheaded person, over."
Powell, however, remained cautious on the economic outlook, saying the central bank needs more time to see if rising tariffs drive inflation higher.
"Increases in tariffs this year are likely to push up prices and weigh on economic activity," Powell said in testimony prepared for delivery this morning at a hearing before the House Financial Services Committee.
"The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent...For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance."
Tesla stock continues to gain
In the corporate sector, Tesla (NASDAQ:TSLA) shares added to Monday’s strong gains after the company officially launched its long-awaited Robotaxi service in Austin, Texas, using a small fleet of 10 to 20 Model Y vehicles.
Chewy (NYSE:CHWY) stock fell after the pet food and products retailer announced an underwritten public offering of $1 billion of its Class A common stock through JPMorgan (NYSE:JPM). Concurrently, Chewy also agreed to a $100 million share repurchase program.
KB Home (NYSE:KBH) stock dropped after the homebuilding company lowered its full-year housing revenues guidance to the range of between $6.3 billion to $6.5 billion. Previously, the company had predicted a range of between $6.6 billion to $7 billion.
Peter Nurse, Ayushman Ojha contributed to this article