S&P 500, Nasdaq Surge as Investors Weigh Fed Comments and Geopolitical Developments

If you've been avoiding your portfolio lately, Tuesday might be a nice day to take a peek.

After a March that felt like it lasted approximately seven years, Wall Street decided to end the month on a high note. Whether this is the start of a real rally or just a breather before more chaos remains the trillion-dollar question.

The popular indexes were way up by 1:30 p.m. ET. The Dow Jones Industrial Average (DJINDICES: ^DJI) had gained 2.1% after a slow start, on the heels of a 2.4% jump in the S&P 500 (SNPINDEX: ^GSPC). The more volatile Nasdaq Composite (NASDAQINDEX: ^IXIC) led the bullish charge with a 3.6% increase:

^DJI data by YCharts

Why stocks are actually going up today

Two big stories drove the optimism. First, Fed Chair Jerome Powell spoke on Monday and managed not to terrify anyone. Investors took his remarks as a sign that the Fed isn't about to do anything drastic on rates, even with inflation concerns swirling.

Reports that President Trump discussed a potential end to the Iran conflict gave investors more reasons for optimism. Given that the war has basically hijacked market sentiment all month, even a hint of de-escalation was enough to spark a rally. Oil prices ticked down but are still hovering near multi-year highs, as indicated by the United States Oil Fund (NYSEMKT: USO) rising 84% year-to-date. The energy picture remains messy, but hope is a powerful thing on Wall Street.

Image source: Getty Images.

The winners and losers told an interesting story. Goldman Sachs and Caterpillar led the Dow charge, both up around 5%. Microsoft and JPMorgan chipped in solid gains too, but their moves made a smaller splash due to significantly lower share prices. The Dow's price-weighted structure makes a real difference.

In corporate news, Nvidia (NASDAQ: NVDA) announced a $2 billion investment in Marvell Technology (NASDAQ: MRVL) as part of an AI infrastructure partnership. Marvell shares surged more than 12% on the announcement, but the surge didn't move the needle on the major market indexes. Marvell is not a Dow component, and its $83 billion market cap makes it a minnow on the cap-weighted Nasdaq and S&P 500 lists, where leaders such as Nvidia come with trillion-dollar footprints.

The bigger picture

Let's keep this in perspective. The S&P 500 and Dow are still heading for their worst month since September 2022. The Nasdaq is wrapping up its weakest month in a year. The Nasdaq is technically in correction territory even after Tuesday's jump, and the other indexes are not far away. Both posted drawdowns of 9% or more last night, so they're teetering on the 10% threshold that defines a market correction.

For long-term investors, today's rally underscores that markets can move sharply in either direction on news developments. Those with investment horizons measured in years rather than weeks may view the current volatility as an opportunity to add to quality positions at lower valuations.

Stick to your plan, stay diversified, and maybe resist the urge to refresh your brokerage app every five minutes. Your nerves will thank you.

JPMorgan Chase is an advertising partner of Motley Fool Money. Anders Bylund has positions in Nvidia. The Motley Fool has positions in and recommends Caterpillar, Goldman Sachs Group, JPMorgan Chase, Marvell Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.