The U.S. stock market saw a strong rally on Tuesday as the S&P 500 surged back into positive territory for 2025, buoyed by easing trade tensions and a major chip deal involving Nvidia. The index rose 0.72% to close at 5,886.55, while the Nasdaq Composite jumped 1.61% to 19,010.08. However, the Dow Jones Industrial Average slid 269.67 points, or 0.64%, dragged down by a sharp decline in UnitedHealth shares.
Nvidia shares soared 5.6% following news that the company will supply 18,000 top-tier AI chips to Saudi Arabia. The announcement lifted the broader semiconductor sector, with Broadcom up nearly 5% and AMD gaining 4%.
The rally marks a significant recovery, as the S&P 500 had previously been down over 17% year-to-date. Investor confidence received a major boost after the U.S. and China reached a 90-day truce in their ongoing tariff dispute, spurring a 1,000-point surge in the Dow the previous day.
“This chip deal with Saudi Arabia, softening inflation, and concrete details on upcoming tax reforms have turned sentiment risk-on,” said Jamie Cox, Managing Partner at Harris Financial Group. “With the White House also announcing a $600 billion investment from Saudi Arabia, the markets are optimistic.”
Further fueling the bullish momentum was new data from the U.S. Bureau of Labor Statistics showing that the consumer price index (CPI) rose just 2.3% year-over-year in April, lower than economists’ forecast of 2.4%.
“Markets have been plagued by fears of a tariff-induced recession and persistent inflation,” noted Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management. “These latest developments have calmed those fears significantly. While high valuations and market concentration remain risks, this is the kind of news that sustains a rally.”
With improving macroeconomic indicators, easing geopolitical tensions, and strategic investments pouring in, the outlook for U.S. equities in the near term appears increasingly positive.
