The S&P 500 and the Dow closed modestly higher as risk appetite driven by AI fervor was counterbalanced by tensions arising from US-Iran talks to reopen the Strait of Hormuz and end the months-long war.
Gains in most of the 11 major S&P sectors kept the S&P 500 and the Dow in the green, with the small-cap Russell 2000 outperforming its larger-cap peers. The Nasdaq ended the session nominally higher.
Small-cap stocks have been some of the biggest beneficiaries of the ongoing enthusiasm surrounding artificial intelligence stocks, which provided some upside muscle. The Philadelphia SE Semiconductor Index advanced 5.9 per cent.
The Software & Services Index, battered in recent months over worries of AI disruption, ended off 3.3 per cent.
Strong results from Hewlett Packard Enterprise and a funding commitment from Alphabet reinforced confidence in the AI buildout.
"The market is kind of muted at the surface level, but there is a lot going on under the hood, and that describes much of this year," said Mike Dickson, head of portfolio management at Horizon Investments in Charlotte, North Carolina.
"There's some massive dispersion in the whole AI infrastructure ecosystem.
"Markets could be in for one of these heated, melt-up rallies where the momentum keeps winning.
"I would not be surprised at all to be sitting here at the end of the summer a good bit higher."
Tehran is studying a US proposal to bring the war to a halt, but has not been in contact with Washington for days, according to Iranian media, which also said Iran is taking a "stern" approach, given what it views as a history of US noncompliance and mutual distrust.
Simultaneously, Israel is continuing its strikes on Lebanon, despite Tehran's warnings that the attacks are threatening to derail the fragile truce.
The war has sent crude prices soaring, reviving worries over inflation and giving rise to an increasing likelihood that the US Federal Reserve could hike interest rates by year-end.
Cleveland Fed President Beth Hammack said on Tuesday that such a hike could become necessary if already-elevated inflation pressures continue to mount.
On the economic front, a report from the Labor Department showed an unexpected spike in job openings, driven by the volatile professional and business services sector.
Otherwise, hiring, firing and quits all decreased, suggesting a slowdown in labour market churn in the face of uncertainties related to strife in the Middle East and inflationary effects.
Analysts look to the May employment report due on Friday, which is expected to show the US economy added 85,000 jobs last month, a monthly deceleration of 26.1 per cent. The unemployment rate is forecast to stand pat at 4.3 per cent.
The Dow Jones Industrial Average rose 228.91 points, or 0.45 per cent, to 51,307.79, the S&P 500 gained 9.94 points, or 0.13 per cent, to 7,609.90 and the Nasdaq Composite gained 7.09 points, or 0.03 per cent, to 27,093.90.
Among the 11 major sectors of the S&P 500, utilities gained the most, while communication services suffered the steepest percentage loss.
Hewlett Packard Enterprise jumped 19.5 per cent after the AI server maker pulled forward its long-term financial targets by two years.
In further evidence of AI buildout, Alphabet said it was looking to raise $US80 billion ($A111 billion) in equity offerings, including an investment from Berkshire Hathaway, to fund a costly expansion of its AI infrastructure.
Its shares slipped 3.9 per cent. Marvell Technology's shares surged 32.5 per cent after Nvidia Chief Executive Officer Jensen Huang called the chipmaker the next "trillion-dollar company" at the Computex conference in Taipei. Nvidia invested $US2 billion ($A2.8 billion) in Marvell in March.
A 5.7 per cent drop in bitcoin hit cryptocurrency firms. Coinbase dropped 4.7 per cent while Strategy Inc sank 9.2 per cent.
Broadcom reports quarterly results on Wednesday.
Advancing issues outnumbered decliners by a 1.52-to-1 ratio on the New York Stock Exchange. There were 571 new highs and 139 new lows on the NYSE.
On the Nasdaq, 2,280 stocks rose and 2,506 fell as declining issues outnumbered advancers by a 1.1-to-1 ratio.
The S&P 500 posted 29 new 52-week highs and 17 new lows while the Nasdaq Composite recorded 134 new highs and 96 new lows.
Volume on US exchanges was 20.51 billion shares, compared with the 19.93 billion average for the full session over the last 20 trading days.
