U.S. equity markets opened mixed on Wednesday, as investors digested a new NATO defense spending agreement, cautious remarks from Federal Reserve Chair Jerome Powell, and a modest recovery in oil prices. The Nasdaq Composite led gains, rising 118.59 points, or 0.60%, to 20,031.1. The S&P 500 advanced 11.75 points, or 0.19%, to 6,103.93. The Dow Jones Industrial Average edged lower, down 47.36 points, or 0.11%, to 43,041.7, as of 9:31 a.m. ET.

The morning's risk sentiment was buoyed in part by NATO’s landmark pledge to dramatically ramp up defense spending. At a summit in The Hague, alliance members committed to allocate 5% of GDP annually to defense and security by 2035. The target comprises 3.5% for core defense and 1.5% for cybersecurity and infrastructure-related security efforts, underscoring a shift toward Cold War-era readiness amid growing global tensions.

The commitment comes as geopolitical uncertainty continues to factor into market valuations. With the United Kingdom and Baltic states signaling full compliance, and larger economies like Spain and Italy expressing reservations, investor attention has turned to which industries may benefit. Defense and cybersecurity equities are likely to see continued inflows, although the uneven implementation across Europe may limit immediate impact.

Meanwhile, Federal Reserve Chair Jerome Powell returns to Capitol Hill for the second day of his semiannual testimony, this time before the Senate Banking Committee. Markets responded positively to Powell’s continued message of cautious flexibility. On Tuesday, before the House Financial Services Committee, Powell affirmed the Fed's current “wait and see” approach, stating, “We’re in a watch and wait mode.” He acknowledged persistent inflation risks, especially from rising tariffs, but emphasized that current data does not suggest a recession. The labor market, he noted, “does not show weakness,” while financial stability remains intact.

Crude oil futures also caught investors’ attention. West Texas Intermediate for August delivery rose $0.63, or 0.98%, to $65.00 a barrel, according to Yahoo Finance. The day’s range hovered between $64.51 and $65.65, suggesting cautious optimism in energy markets despite broader macroeconomic uncertainty.

The Russell 2000 Index of small-cap stocks slightly declined, falling 0.38 points to 214.09. Market breadth indicators at the open showed no new highs or lows, and a neutral advance-decline ratio, suggesting investors are still seeking direction as macroeconomic and geopolitical narratives unfold.

In summary, Wednesday’s early session revealed a market cautiously optimistic but wary of latent risks. With defense budgets rising and monetary policy on hold, traders appear to be repositioning toward sectors with upside under continued inflation and elevated geopolitical stress.