The S&P 500 closed above 7,000 for the first time on Tuesday, capping a remarkable recovery from the war-driven sell-off that rattled markets in February and March.
Why it matters: The record close signals that investors believe the worst of the US-Iran conflict’s market impact is behind them. The S&P 500 has now erased all losses sustained since the war began.
The rally
The S&P 500 rose 0.80% to finish at 7,022.95. The Nasdaq Composite gained 1.59% to close at 24,016.02, also a record. Both indices were powered by technology stocks, with Microsoft leading all S&P 500 components with a 5.23% gain.
The Dow Jones Industrial Average was the outlier, slipping 0.15% to 48,463.72. Caterpillar dragged the index lower, falling 3.62% on signs of slowing global demand for heavy equipment.
Two drivers
The first is earnings. Q1 2026 results from JPMorgan Chase, Goldman Sachs, Morgan Stanley, and Bank of America all beat expectations, with S&P 500 earnings on track for a sixth consecutive quarter of double-digit growth. According to FactSet, aggregate earnings grew an estimated 12.5% year over year.
The second is geopolitics. Reports that the United States and Iran are considering a return to direct talks in Islamabad lifted sentiment. Oil prices fell on the news, easing inflation fears that had weighed on equities for weeks.
What happens next
Investors are watching a fresh wave of earnings on Thursday, with Netflix, PepsiCo, and Charles Schwab all due to report. Any disappointment could test whether the rally has staying power.
Futures pointed to a modestly higher open on Wednesday morning.