*

Tesla up on robotaxi launch in Texas

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US business activity moderates; price pressures building

up

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Crude drops as Iran retaliation leaves shipping routes

undisrupted

(Updates to market close)

By Stephen Culp

NEW YORK, June 23 (Reuters) -

Wall Street rallied on Monday as prospects of the U.S.

Federal Reserve cutting interest rates as early as July offset

fears that Iran would disrupt crude transport in the Middle

East.

All three major U.S. stock indexes closed higher.

Consumer discretionary stocks led the gainers, with a

solid boost from Tesla.

"The rally is a bit surprising," said Jay Hatfield, CEO and

portfolio manager at InfraCap in New York. "In a way the U.S.

attack puts an end to the uncertainty of whether the U.S. is

going to attack."

"The market action is extremely bullish because this is the

time frame in June when we're supposed to have a pullback,"

Hatfield added. "People do not want to sell in this market."

Federal Reserve Vice Chair Michelle Bowman said on Monday

that "it is time to consider adjusting the policy rate," as

risks to the job market outweigh inflationary concerns related

to tariffs. Federal Reserve Bank of Chicago president Austan

Goolsbee said that thus far, tariffs have had a more modest

economic impact than expected.

Financial markets are pricing in at least two 25-basis-point

rate cuts before year-end. The first cut is widely expected to

happen in September.

"I've been in the camp that the Fed probably would not move

at all this year," said Paul Nolte, senior wealth advisor &

market strategist at Murphy & Sylvest in Elmhurst, Illinois.

"(Fed Chair) Powell's 'wait and see' is probably not a bad

tactic, but of course, the markets always love lower interest

rates."

Tesla shares surged after the long-awaited

launch of the company's robotaxi service in Austin, Texas.

Israel continued to bombard Iran the day after the U.S. joined

the war.

Still, oil prices tumbled after Iran's retaliation

did not include action to disrupt oil and gas tanker traffic

through the Strait of Hormuz. Tehran had warned it would close

the Strait of Hormuz, a crucial oil shipping route.

"The markets are reading this as 'hey, we're successful,' we

took out their nuclear capabilities and we were able to support

any counter-strikes," Nolte said. "I think there was a lot of

concern that Iran would do much more than it did."

On the economics front, S&P Global's advance "flash"

purchasing managers' indexes (PMI) showed the U.S. economy is

expanding at a slightly more robust pace than analysts

anticipated. A separate report showed new home sales, while

under pressure from elevated borrowing costs, posted an

unexpected gain in May.

Later in the week, the Commerce Department's final take on

first-quarter GDP and its Personal Consumption Expenditures

(PCE) and Fed Chair Jerome Powell's congressional testimony are

likely to be parsed for clues regarding the near-term path of

monetary policy.

According to preliminary data, the S&P 500

gained 57.20 points, or 0.96%, to end at 6,025.04 points,

while the Nasdaq Composite gained 183.98 points, or

0.95%, to 19,631.39. The Dow Jones Industrial Average

rose 373.48 points, or 0.88%, to 42,580.30.

Fiserv's ( FI ) shares rose following its announcement that

it would launch a new digital asset platform.

Northern Trust ( NTRS ) jumped after a Wall Street Journal

report said Bank of New York Mellon ( BK ) broached the topic of

a potential merger.

AI-server-maker Super Micro Computer ( SMCI ) dropped after

it announced a private offering of $2 billion five-year

convertible bonds.

Quarterly results from sportswear company Nike ( NKE ) and

package delivery firm FedEx ( FDX ) are expected later in the

week.