Optimism surrounding the AI trade and hopes of strong corporate earnings lifted US equities lately, further boosting the bull market that began in October 2022
The benchmark S&P 500 and the Nasdaq hit record highs on Tuesday as Treasury yields eased from multi-year highs and oil prices fell, while investors looked ahead to the upcoming quarterly earnings season.
Most of the ‘Magnificent Seven’ stocks ticked higher, with Meta, Tesla, Amazon.com and Microsoft all up between 0.5% and 1.7%.
Optimism surrounding the AI trade and hopes of strong corporate earnings lifted US equities lately, further boosting the bull market that began in October 2022 despite higher energy prices and a volatile summer for bond markets that fueled concerns about tighter monetary policy.
“The economy continues to be more resilient than many expected, and corporate earnings remain strong, but the big change is rising interest rates,” said David Miller, chief investment officer at Catalyst Funds.
“Investors are now dealing with meaningfully higher long-term rates … I am still bullish on equities, but the hurdle has gone up significantly.”
Government bond yields eased across the curve, including a 5.3-basis-point decline for the benchmark 10-year bond .
A soft payrolls report last week reduced chances of an interest rate hike in October, with traders now seeing a near 79% chance of a hold, though a December rate hike remains largely priced in, according to the CME Group’s FedWatch tool.
On Tuesday, at least four Fed officials, including New York Fed President John Williams, are slated to deliver public remarks.
All 11 SP 500 sectors were trading higher, with utilities and real estate leading the gains.
At 11:33 a.m. ET, the Dow Jones Industrial Average rose 359.08 points, or 0.70%, to 51,626.98, the SP 500 gained 66.16 points, or 0.86%, to 7,840.66 and the Nasdaq Composite gained 228.58 points, or 0.83%, to 27,705.89.
Oil prices, meanwhile, fell around 2% as resilient Middle Eastern crude exports and a G7 emergency stockpile release eased supply concerns.
The third-quarter earnings season will kick off next week. Analysts on average expect S&P 500 earnings to jump over 30% year over year in the quarter, thanks largely to AI-related stocks, according to LSEG data.
Marvell Technology climbed 6.5% after the chip designer raised its 2028 revenue forecast to about $20 billion on Tuesday, citing strong demand for its chips used in data centers.
Chipmaker AMD gained 3.6% after CEO Lisa Su said the company planned to substantially increase chip supply in 2027 to meet booming AI demand.
Constellation Energy was the top gainer on the SP 500, up 13.9% after Alphabet’s Google entered into a 3,590-megawatt power deal with the company.
Option Care Health jumped 32.7% after drug distributor McKesson and private equity firm Clayton Dubilier Rice agreed to buy the infusion therapy provider in a deal worth about $5.8 billion, including debt.
Advancing issues outnumbered decliners by a 2.93-to-1 ratio on the NYSE and by a 1.72-to-1 ratio on the Nasdaq.
The S&P 500 posted 21 new 52-week highs and one new low, while the Nasdaq Composite recorded 48 new highs and 123 new lows.
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