Key facts
- S&P 500 gain
- 1.8%
- Dow gain
- 907 points (1.7%)
- Nasdaq gain
- 2.6%
- Brent crude drop
- 5.3% to $79.36/barrel
- 10-year Treasury yield
- 4.62% (down from 4.70%)
- Palantir revenue growth
- 93%
Background
The U.S. stock market rallied to records on Tuesday, with the S&P 500 climbing 1.8% to surpass its previous all-time high set a couple of months ago. The Dow Jones Industrial Average added 907 points, or 1.7%, to its own record set the day before, while the Nasdaq composite jumped 2.6%.
The gains came despite worries about high inflation, the war in Iran, frustration with the economy, and concerns about a possible bubble in stock prices due to the boom in artificial-intelligence technology. Wall Street's latest apex rewarded investors who remained patient because corporate profits continue to soar, and stock prices tend to follow the path of corporate earnings over the long term.
Current situation
Palantir Technologies led the way, surging 29.5% after CEO Alex Karp said its overall revenue leaped 93% in what he called an 'otherworldly' quarter. The AI company also reported a stronger profit for the spring than analysts expected and raised its revenue forecast for the full year of 2026.
Caterpillar climbed 5.6% after the heavy-equipment maker reported stronger profit and revenue than analysts expected. It was the first time Caterpillar made more than $20 billion in sales and revenue in a quarter, and CEO Joe Creed said it's seeing strong order rates and a growing backlog across its main businesses. Caterpillar is also benefiting from the AI boom through increased orders for turbines used to power data centers.
These are the latest companies to deliver better profits for the latest quarter than investors expected, following strong results from Amazon, Microsoft and others. Coming into this week, companies in the S&P 500 index were on track to deliver growth of nearly 50% in earnings per share for the spring from a year earlier, according to FactSet. That would be the biggest such jump since 2021, when the economy was roaring back to life after cratering in the COVID-19 pandemic.
| Indicator | Value |
|---|---|
| S&P 500 | +1.8% |
| Dow Jones Industrial Average | +907 points (+1.7%) |
| Nasdaq composite | +2.6% |
| Brent crude | $79.36 per barrel (-5.3%) |
| 10-year Treasury yield | 4.62% (down from 4.70%) |
| Palantir stock | +29.5% |
| Caterpillar stock | +5.6% |
| Nvidia stock | +2.6% |
| Broadcom stock | +6.6% |
| Micron Technology stock | +7.6% |
| Chipotle stock | -9.7% |
| Kospi | +1.6% |
Impacts
Also helping stocks on Tuesday was another drop for oil prices. Brent crude, the international standard, sank 5.3% to $79.36 per barrel as hope once again took over from fear in the oil market. It had swung sharply between $72 and $102 through July on uncertainty about when the war with Iran would allow oil tankers to freely exit the Persian Gulf again to deliver crude around the world.
The latest drop in oil prices helped ease Wall Street's worries about inflation. That pulled down yields in the bond market, which in turn relaxed pressure on the overall economy and on prices for stocks and other investments. The yield on the 10-year Treasury fell to 4.62% from 4.70% Monday and from 4.75% at the end of last week. That's a notable move for the bond market, though it remains well above its 3.97% level from before the war with Iran.
Higher yields make it more expensive for all kinds of Americans to borrow money, from homebuyers looking for a mortgage to big companies looking to build AI data centers. Reports on the U.S. economy, meanwhile, showed it remains resilient even though inflation remains worse than anyone would like. One said U.S. employers were advertising nearly 7.4 million job openings at the end of June, a slight slowdown from May's level but close to economists' expectations.
Future outlook
Scenario analysis: The possibilities below are not certain predictions.
Analysts warn more swings in oil prices could be ahead, but the latest drop nevertheless helped ease Wall Street's worries about inflation. If oil prices continue to fall, it could further reduce inflationary pressures and support stock valuations. However, if the war with Iran escalates and disrupts oil tanker exits from the Persian Gulf, prices could spike again, potentially hurting the market.
The strong earnings season, with S&P 500 companies on track for nearly 50% earnings per share growth, may continue to support stock prices if the trend persists. But if inflation remains high and the Federal Reserve is forced to keep interest rates elevated, that could weigh on corporate profits and stock prices. The market's resilience may depend on whether earnings growth can outpace concerns about inflation and geopolitical risks.
In South Korea, the Kospi climbed 1.6% after sharp swings in prior days, driven by AI-related stocks like Samsung Electronics and SK Hynix. If the AI boom continues, these markets could see further gains, but any reversal in AI sentiment could lead to significant volatility.
Source: salinapost.com
