Key Takeaways
- Nasdaq surges 2.05% to an unofficial close of 25,846.12 as reports of a potential US-Iran peace deal trigger a broad market rally and a sharp decline in oil prices.
- President Trump pauses "Project Freedom" naval escorts in the Strait of Hormuz, citing "strong progress" toward a final agreement, while simultaneously warning of an "excursion" to secure Iranian nuclear material.
- Warner Bros Discovery (WBD) reports a massive Q1 loss of $1.17 per share, far exceeding the estimated $0.07 loss, largely due to a $2.8 billion termination fee paid to Netflix.
- Elon Musk announces the dissolution of xAI as a standalone entity, integrating its operations into SpaceX to form SpaceXAI, which has already signed a major compute-sharing deal with Anthropic.
- Fed’s Austan Goolsbee warns that persistent supply chain strains from the US-Iran conflict and "wealth-effect spending" tied to AI productivity could keep inflation above target.
U.S. equity markets rallied sharply on Wednesday as geopolitical optimism outweighed mixed corporate earnings and hawkish-leaning commentary from Federal Reserve officials. The Nasdaq Composite led the gains, rising 2.05%, while the S&P 500 and Dow Jones Industrial Average climbed 1.49% and 1.31% respectively. The rally was fueled by reports from Axios suggesting that Washington and Tehran are close to a memorandum of understanding to end their two-month conflict, potentially reopening the Strait of Hormuz to global trade.
President Trump confirmed "strong progress" in talks over the last 24 hours, stating that a "Complete and Final Agreement" could be near. Despite the diplomatic overtures, the President maintained a hard line on Iran’s nuclear ambitions, telling reporters in the Oval Office that the U.S. may still need to make an "excursion" into Iran to seize nuclear material. Meanwhile, the IRGC Navy claimed it currently "dominates" the Strait of Hormuz, warning that any potential attack would face a response "beyond the enemy's calculations."
In the technology sector, Nvidia (NVDA) jumped 5% as investors cheered a new wave of AI infrastructure deals. Elon Musk announced that xAI will be folded into SpaceX to form SpaceXAI, a move intended to streamline AI product development. The newly formed unit has already agreed to rent data center capacity at its Colossus 1 facility to rival firm Anthropic, providing them with access to over 220,000 Nvidia GPUs to boost their Claude AI models.
Warner Bros Discovery (WBD) faced a difficult session after reporting a Q1 loss of $1.17 per share on revenue of $8.89 billion. While its streaming division beat expectations with $2.89 billion in revenue, the bottom line was hammered by a $2.8 billion fee paid to Netflix. The company also noted that the absence of NBA broadcasting rights negatively impacted advertising revenue, which fell 8% on a currency-adjusted basis.
UPS (UPS) shares remained under pressure as the courier giant warned of $1.2 billion in separation costs for 2026 related to its "Driver Choice" program. The company indicated it would continue to assess volume shifts and could implement additional job reductions to manage costs. In contrast, CME Group (CME) announced it will launch 24/7 trading for cryptocurrency futures and options starting May 29, responding to record institutional demand for digital asset risk management.
Federal Reserve Bank of Chicago President Austan Goolsbee provided a cautious backdrop to the day's gains, noting that inflation has remained above target for five years with "little further progress." Goolsbee warned that while productivity improvements from AI are promising, they could perversely drive inflation higher if households increase spending in anticipation of future wealth. He emphasized that every policy option remains open, particularly if high oil prices from the ongoing Middle East tensions become embedded in consumer expectations.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.