U.S. stocks climbed Tuesday, sending the S&P 500 and Nasdaq Composite to record closing highs as easing Treasury yields, steadier oil prices and continued enthusiasm over artificial intelligence shifted investor attention toward the upcoming third-quarter earnings season.
By yourNEWS Media Newsroom.
U.S. stocks finished higher Tuesday, with the S&P 500 and Nasdaq Composite setting record closing highs as Treasury yields retreated and crude oil prices stabilized, easing some of the inflation concerns that have pressured markets in recent weeks.
The S&P 500 gained 45 points, or 0.58%, to close at 7,818.95, while the Nasdaq Composite rose 122.48 points, or 0.45%, to 27,599.79. The Dow Jones Industrial Average added 253.14 points, or 0.49%, to finish at 51,521.04.
The S&P 500 and Nasdaq both established all-time closing records. The Dow remained slightly more than 5% below its Aug. 5 record.
Investors were encouraged by a pullback in government bond yields and an easing of the recent surge in energy prices, which has fueled concerns that higher fuel costs could keep inflation elevated and force the Federal Reserve to continue raising interest rates.
“When oil prices stabilize or move lower, that causes yields to move down because there’s less anxiety about energy-driven inflation, which in turn is helping lift stocks higher,” Oliver Pursche, senior vice president at Wealthspire Advisors in New York, said. “This has been the narrative of the market for the last couple of weeks.”
The benchmark 10-year Treasury yield declined Tuesday after recently reaching levels not seen in more than two decades.
Oil prices also steadied as markets weighed recovering Middle Eastern exports against continuing supply risks from the Iran war.
Brent crude settled around $100 a barrel while West Texas Intermediate remained below $90 after the Group of Seven agreed to release emergency diesel and crude inventories in an effort to alleviate global shortages.
The planned stockpile release, combined with stronger Gulf exports, has helped ease fears of an immediate supply crisis despite continuing military conflict and disruptions around the Strait of Hormuz.
The Federal Reserve outlook also shifted.
Futures markets were pricing in a substantially lower probability that policymakers would raise interest rates for a second consecutive meeting in October. Traders placed the probability of no rate change at nearly 80% Tuesday, according to CME’s FedWatch tool.
“We don’t expect the Fed to do anything at the next meeting,” Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, said. “But I think they’re in a gradual hiking cycle.”
“High oil prices have hit a broad range of consumers,” Ghriskey added. “That’s one of the reasons for the recent Fed hike.”
Artificial intelligence remained another major source of support for equities.
Six of the seven large technology companies commonly grouped as the “Magnificent Seven” advanced Tuesday, while semiconductor shares also moved higher.
The Philadelphia Semiconductor Index gained ground as investors continued betting that enormous expenditures on AI data centers, chips and power infrastructure would translate into higher corporate earnings.
Recent U.S. trade figures provided additional evidence of that investment boom.
Imports of capital goods rose 4.4% in August, in part reflecting strong demand for equipment used in technology and artificial intelligence infrastructure.
The Commerce Department reported that the U.S. trade deficit increased 13.7% during August as imports reached a record high.
Imports rose 4.3% from the previous month and were 28.4% higher than a year earlier, indicating strong domestic demand but also raising concerns that continued import growth and wartime supply constraints could add to inflationary pressures.
Investors nevertheless turned much of their attention toward corporate earnings.
Third-quarter reporting season begins next week, with several large financial institutions scheduled to release results Tuesday.
Analysts expect S&P 500 companies collectively to report year-over-year earnings growth of 30.6% for the July-through-September quarter, according to LSEG estimates.
Energy companies are projected to lead the increase with earnings growth of 114.7%, followed by technology companies at approximately 66.5%.
Artificial intelligence spending is expected to play a major role in those results.
Marvell Technology shares climbed after the semiconductor designer raised its fiscal 2028 revenue forecast to approximately $20 billion, citing accelerating demand for customized data-center chips.
The company has increasingly benefited as large technology companies develop proprietary processors as alternatives or complements to Nvidia’s dominant AI chips.
Marvell now expects approximately $12 billion in custom-chip revenue by fiscal 2029.
Shares of Advanced Micro Devices also advanced after CEO Lisa Su said the chipmaker plans to substantially increase supply in 2027 to satisfy rapidly growing demand for AI processors.
Energy infrastructure stocks also benefited from the technology industry’s enormous electricity requirements.
Constellation Energy surged after Alphabet’s Google entered into a 3,590-megawatt power agreement with the utility company, another indication of the electricity demands created by large-scale AI data centers.
Option Care Health was among Tuesday’s largest individual stock gainers after drug distributor McKesson and private equity firm Clayton, Dubilier & Rice agreed to acquire the infusion therapy provider in a transaction valued at approximately $5.8 billion, including debt.
The offer values Option Care at $32.05 per share, a premium of more than 37% to its previous closing price. Its shares jumped more than 32% Tuesday.
Market gains were broad.
Ten of the S&P 500’s 11 major industry sectors finished higher, with utilities leading the advance. Healthcare was the only sector to decline.
Advancing stocks also outnumbered declining issues on both the New York Stock Exchange and Nasdaq.
The rally came despite lingering risks facing investors.
Oil prices remain dramatically higher than before the Iran conflict, global bond markets remain volatile and long-term U.S. borrowing costs are still near multi-decade highs.
The Energy Information Administration raised its oil-price forecasts again Tuesday, citing depleted global inventories, constrained diesel supplies and continuing disruptions related to the Iran war.
Brent crude is now expected to average approximately $105 per barrel during the fourth quarter.
Those pressures could complicate the Federal Reserve’s effort to contain inflation even as economic growth and corporate profits remain strong.
For now, however, investors appeared more focused on declining Treasury yields, improving energy supplies and the expected surge in corporate earnings.
With the S&P 500 and Nasdaq ending Tuesday at their highest closing levels on record, the approaching earnings season will provide the next major test of whether corporate profits can justify the market’s continued advance.
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