Dow opens 349 points higher as chip stocks rally on Iran deal optimism

US stocks opened higher on Thursday as investors looked to recover from the previous session's selloff, with optimism surrounding a temporary US-Iran peace agreement helping offset concerns about a more hawkish Federal Reserve under new Chair Kevin Warsh.

The Dow Jones Industrial Average rose about 349 points, or 0.68%, while the S&P 500 gained 1.03%. Nasdaq Composite climbed 1.18%, led by strength in semiconductor stocks.

The rebound followed Wednesday's sharp market decline after Federal Reserve officials left interest rates unchanged but indicated that additional rate hikes may still be necessary to contain inflation.

Investors weigh Fed outlook and policy uncertainty

Financial markets reassessed the path of monetary policy after the Federal Reserve's first meeting under Warsh's leadership.

The central bank held its benchmark interest rate steady, but policymakers' projections suggested a more hawkish stance than investors had anticipated.

Nine of 18 officials now expect interest rates to increase in 2026, while Warsh declined to submit his own rate forecast.

Market expectations for further tightening increased sharply.

According to CME Group's FedWatch tool, investors are now pricing in a 50% probability of a quarter-point rate increase in September, up from 27% on Wednesday.

Analysts said the combination of leadership changes and diverging views among policymakers may keep the Federal Reserve on hold for an extended period.

Middle East optimism and lower oil prices support sentiment

Despite concerns about monetary policy, investor sentiment improved as oil prices fell to their lowest levels in more than three months, raising hopes that inflation pressures could ease without requiring further rate increases.

The United States and Iran also released the text of an interim agreement signed by both presidents.

The agreement extends the ceasefire reached in April by another 60 days, providing additional time for negotiations toward a final peace deal.

Markets have largely recovered from the weakness seen earlier in June, supported by a resilient US economy, a broadening rally beyond technology stocks, and optimism surrounding diplomatic progress in the Middle East.

Recent economic data also reinforced confidence in the economy.

Data released on Wednesday showed that US retail sales increased more than expected in May, with consumers purchasing more automobiles and other goods despite higher gasoline prices.

Semiconductor stocks lead gains

Technology and semiconductor shares led Thursday's advance.

Intel shares rose more than10% in trading after President Donald Trump said Apple had agreed to work with the company on designing and manufacturing chips in the United States.

Other chipmakers also moved higher. Nvidia gained more than 1.2%, while Micron Technology and Marvell Technology advanced more than 5%.

The iShares Semiconductor ETF rose more than 4.6%.

Elsewhere, shares of Rumble jumped 13% after the company rebranded as RUM Group and completed its acquisition of German AI cloud company Northern Data.

Smith & Wesson gained more than 23% after reporting higher fourth-quarter sales.

Accenture moved sharply lower, falling more than 15% after trimming the upper end of its annual revenue forecast and announcing plans to acquire a majority stake in Dragos and fully acquire runZero and NetRise in a combined deal valued at $4.18 billion.

Investors were also preparing for the quarterly expiration of stock options, index options, and futures contracts, commonly known as "triple witching," an event that can increase trading volumes and market volatility.