The S&P 500 and Dow closed modestly higher on Tuesday as risk appetite fueled by AI enthusiasm was counterbalanced by tensions stemming from the reopening of the Strait of Hormuz and US-Iran talks to end the months-long war.

Gains in most of the 11 major S&P sectors kept the S&P 500 and Dow in the green, with the small-cap Russell 2000 outperforming its large-cap peers. Nasdaq ended the session essentially unchanged.

Small-cap stocks have been some of the biggest beneficiaries of the excitement surrounding artificial intelligence stocks, which has provided some upside muscle. The Philadelphia SE Semiconductor Index advanced on the day.

The software and services index, battered in recent months by worries about AI disruption, closed in negative territory.

Strong results from Hewlett Packard Enterprise and a funding commitment from Alphabet reinforced confidence in the AI ​​buildout.

“The market is kind of muted on the surface level, but there’s a lot going on under the hood, and that describes a lot of this year,” said Mike Dixon, head of portfolio management at Horizon Investments in Charlotte, North Carolina. “There is some massive disruption in the entire AI infrastructure ecosystem.”

“The market could be in for one of these hot, meltdown rallies where momentum keeps winning,” Dixon added. “It wouldn’t surprise me at all to be sitting here at the end of the summer.”

Tehran is studying a US proposal to halt the war, but has not been in contact with Washington for days, according to Iranian media, which also said Iran was taking a “tough” approach to what it sees as a history of US non-compliance and mutual mistrust. At the same time, Israel continues its strikes on Lebanon, despite warnings from Tehran that the attacks threaten to derail the fragile ceasefire.

The war has boosted crude prices, rekindled concerns about inflation and raised the prospect that the US Federal Reserve could raise interest rates by the end of the year. Cleveland Fed President Beth Hammock said on Tuesday that such a hike may be necessary if already elevated inflationary pressures persist. On the economic front, the Labor Department report showed an unexpected increase in job openings due to a volatile professional and business services sector. Otherwise, hiring, attrition and quits all fell, suggesting a slowdown in the labor market in the face of strife in the Middle East and uncertainties about the effects of inflation.

Analysts look to Friday’s May jobs report, which showed the US economy added 85,000 jobs last month, a monthly decline of 26.1%. The unemployment rate is forecast to remain at 4.3%.

According to preliminary data, the S&P 500 rose 10.07 points, or 0.13%, to close at 7,610.03, while the Nasdaq Composite rose 8.78 points, or 0.03%, to 27,095.59. The Dow Jones Industrial Average rose 237.13 points, or 0.46%, to 51,316.01.

Hewlett Packard Enterprise AI took the leap after the server maker pushed its long-term financial goals by two years. In further evidence of the AI ​​buildout, Alphabet said it wants to raise $80 billion in an equity offering, including an investment from Berkshire Hathaway, to fund an expensive expansion of its AI infrastructure. Its shares lost ground on the day. Shares of Marvell Technology jumped after Nvidia Chief Executive Officer Jensen Huang called the chipmaker the next “trillion-dollar company” at the Computex conference in Taipei. Nvidia invested $2 billion in Marvell in March.

Bitcoin’s decline affects cryptocurrency firms Coinbase and Strategy Inc.

Broadcom is expected to report quarterly results on Wednesday.