U.S. stocks rallied sharply on Tuesday, propelling the Dow Jones Industrial Average and the S&P 500 to fresh record closing highs. The surge was fueled by robust corporate earnings, particularly in the artificial intelligence sector, and a steep decline in crude oil prices that eased inflation concerns.
Record closes for major indices
The Dow climbed approximately 912 points, or 1.7%, to close at 54,090.66, marking its second consecutive record. The S&P 500 advanced 1.8% to 7,737.70, its first record close since early July, while the Nasdaq Composite jumped 2.6% to 26,581.99. The broad-based rally was led by technology shares, with the S&P 500 tech sector posting the largest gains. The Philadelphia Semiconductor Index surged nearly 7%, extending its recovery from a July selloff.
AI earnings reignite optimism
Artificial intelligence remained the dominant market theme as investors welcomed another round of earnings that reinforced confidence in corporate AI spending. Palantir Technologies soared nearly 30%, its biggest one-day gain since February 2024, after reporting better-than-expected second-quarter results and raising its annual revenue forecast. The strong report helped ease concerns about enterprise AI software demand.
Chipmakers also rallied strongly. Micron Technology advanced 7%, while Marvell Technology jumped 12%, as semiconductor stocks continued to rebound. The positive momentum in AI-related names echoes the recent surge in AMD shares on AI data center growth bets.
Beyond tech, Caterpillar provided another boost. The industrial equipment maker climbed about 6% after beating quarterly earnings estimates and raising its full-year revenue growth outlook. Caterpillar cited growing demand for equipment tied to AI data center expansion and said tariff-related costs would come in at the lower end of its prior guidance. This follows the company's record Q2 revenue driven by AI power demand.
Financial stocks also participated, with Goldman Sachs gaining more than 3%, while industrials and materials each rose nearly 2%. Corporate earnings have broadly exceeded expectations this season. According to LSEG data, 85.2% of the 304 S&P 500 companies that reported second-quarter results through Friday beat analyst estimates, well above the long-term average of 67.5%.
Oil prices tumble on Middle East hopes
Markets also benefited from another sharp decline in crude oil prices as hopes for a diplomatic breakthrough between the U.S. and Iran improved sentiment. West Texas Intermediate crude settled 5.69% lower at $75.77 per barrel, while Brent crude fell 5.26% to $79.36 per barrel. The drop followed comments from U.S. Treasury Secretary Scott Bessent indicating that discussions with Iran were ongoing and that a deal to reopen the Strait of Hormuz could be reached within days. Lower oil prices helped ease inflation expectations, contributing to a decline in Treasury yields.
Economic data and earnings watch
Investors also digested fresh economic data showing U.S. job openings declined in June, largely due to weaker hiring demand in healthcare and social assistance. However, rising hiring activity and relatively low layoffs suggested the labor market remained stable. The report kicks off a closely watched week for employment data, culminating in Friday's nonfarm payrolls release, which will guide Federal Reserve policy expectations. According to CME FedWatch, the probability of a Fed rate hike in September fell to 56.9% from 67.2%.
Elsewhere, Amazon slipped about 2% after Jeff Bezos disclosed plans to sell roughly $4 billion worth of shares, while McDonald's and Pfizer both gained following their quarterly earnings reports. The market's resilience, supported by strong earnings and easing oil prices, suggests record highs may be just the start for the S&P 500, according to some analysts.
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