The S&P 500, Nasdaq and Dow all advanced Tuesday as investors returned to semiconductor shares ahead of major technology earnings, despite rising oil prices and new 50% tariffs on Canadian imports.
By yourNEWS Media Newsroom
Wall Street finished broadly higher Tuesday as investors moved back into semiconductor stocks following a sharp pullback, helping major indexes overcome concerns surrounding the Middle East conflict, rising oil prices and President Donald Trump’s newly announced tariffs on Canada.
Technology shares led the session, with chipmakers providing much of the momentum as traders positioned themselves before a closely watched series of corporate earnings reports.
Preliminary closing data showed the S&P 500 rising 64.04 points, or 0.86%, to 7,507.32. The Nasdaq Composite gained 321.53 points, or 1.26%, to finish at 25,829.61, while the Dow Jones Industrial Average added 384.46 points, or 0.74%, to close at 52,223.72.
Information technology was the strongest of the S&P 500’s 11 major sectors. Consumer staples trailed the wider market.
The Philadelphia SE Semiconductor Index posted a sharp second consecutive gain after ending Friday more than 20% below its record high reached in late June.
Chip shares had fallen amid growing concerns that valuations had become excessive and that the enormous sums being invested in artificial intelligence infrastructure might not produce returns quickly enough to justify current stock prices.
Despite the recent correction, the semiconductor index remains nearly 75% higher for the year.
Lindsey Bell, chief investment strategist at 248 Ventures in Charlotte, North Carolina, said investors were rebuilding semiconductor positions before earnings announcements because they feared missing another substantial rally.
“Investors are really buying back in to the semis ahead of earnings because they have fear of missing out (FOMO), that these companies could report outsized earnings beats and increase their outlooks and they don’t own as much as they did before the most recent pullback,” Bell said.
The rebound reflects expectations that chipmakers may report strong revenue growth and raise their forecasts as demand for artificial intelligence processors, data center equipment and related technology continues.
Bell warned, however, that aggressive buying before earnings can make it harder for shares to rise further once the companies publish their results.
When stocks rally significantly ahead of their reports, “it makes it more difficult for them to run in response to earnings,” she said.
“The numbers are going to be really good — but the stocks are also priced for perfection,” Bell added.
That valuation pressure means companies may need to exceed already elevated expectations rather than merely report solid results.
Investors are preparing this week for earnings from Alphabet, Intel and Texas Instruments. Those reports could provide new evidence about artificial intelligence spending, semiconductor demand and the broader financial performance of major technology companies.
The market advance came one day after Trump announced 50% tariffs on a broad range of Canadian imports.
Investors largely set aside the potential economic effects of the new duties during Tuesday’s session, even though tariffs can raise costs for importers, manufacturers and consumers while disrupting closely integrated North American supply chains.
The Canadian measures are scheduled to cover many goods while exempting energy products, potash, fish and critical minerals.
Stocks also rose despite continuing military and shipping tensions in the Middle East.
Oil prices settled approximately 2% higher after reaching five-week highs. The increase followed reports that two tankers transporting Saudi crude oil to Asia reversed course in the Red Sea after Yemen’s Iran-aligned Houthi movement threatened a blockade of commercial shipping.
Trump said the United States would respond if the Houthis carried out the threat.
The Red Sea is a major route connecting the Indian Ocean with the Suez Canal and Mediterranean markets. Disruptions can force vessels to take longer routes around Africa, increasing transportation costs and delivery times.
Bell said investors appeared to believe the current conflict would not continue indefinitely because sustained oil prices near $100 a barrel would create economic and political pressure on Trump ahead of the midterm elections.
“Investors see [the war] as transitory because we know two things — that $100 oil is a pressure point for Trump, and we also know that midterm elections are coming up,” she said.
Higher fuel costs could complicate the administration’s economic position by increasing gasoline prices, transportation expenses and inflationary pressure.
Tuesday’s trading suggested that expectations surrounding technology earnings temporarily outweighed those risks.
Among individual companies, 3M shares rallied after the industrial manufacturer increased its full-year profit forecast.
The revised outlook signaled that the company expects stronger earnings than it had previously projected, attracting buyers despite uncertainty in the broader economy.
Hasbro shares also climbed sharply after the company raised its annual revenue and profit forecasts.
The toy and entertainment company cited demand for its digital gaming business and “Magic: The Gathering” products as important contributors to the improved outlook.
Other companies moved lower after releasing disappointing forecasts or business updates.
Danaher shares declined after the life sciences company reduced its projection for core revenue growth and reported biotechnology revenue below analysts’ expectations.
MSCI stock fell sharply after the index provider increased its full-year operating expense forecast. The higher spending projection overshadowed quarterly revenue that exceeded expectations.
Genuine Parts shares also dropped after the automotive parts distributor lowered its full-year profit forecast.
Those company-specific losses were not enough to offset the broad strength in semiconductor and technology shares.
The session demonstrated the continuing influence of artificial intelligence expectations on the U.S. stock market.
Chipmakers have become central to the AI investment boom because their processors support data centers, model training and other high-performance computing operations. Their rising valuations have also made the wider market increasingly sensitive to changes in spending forecasts and corporate guidance.
Investors who sold semiconductor shares during the recent pullback returned ahead of earnings in anticipation that companies could report results strong enough to renew the rally.
That buying helped shift attention away from geopolitical developments and trade policy for at least one session.
The reaction to Trump’s Canadian tariffs also suggested that traders may expect negotiations, exemptions or modifications before the full economic effects are felt.
Markets have previously experienced volatility after major tariff announcements, particularly when investors feared that higher import costs would intensify inflation or slow economic growth.
Tuesday’s gains did not eliminate those concerns, but they showed that investors were willing to prioritize near-term corporate earnings and technology growth.
The next phase of trading will depend heavily on whether Alphabet, Intel, Texas Instruments and other major companies meet the high expectations already reflected in their share prices.
Strong results and higher forecasts could reinforce confidence in the AI trade. Disappointing reports could renew concerns that semiconductor stocks and other technology companies remain too expensive after their substantial gains.
For Tuesday, renewed enthusiasm for chip shares carried all three major U.S. indexes higher while investors temporarily looked beyond a widening trade dispute and escalating threats to global energy shipments.
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