US STOCKS-AI-linked earnings, Mideast deal hopes send Dow, S&P 500 to record highs

The S&P 500 and Dow Jones hit fresh intraday records on Tuesday, driven by strong earnings from AI-related companies, particularly Palantir and Caterpillar.

The S&P ‌500 ​and the Dow scaled to fresh intraday records on Tuesday, powered by the latest batch of earnings from AI-related companies such as Caterpillar and Palantir that assuaged demand concerns, while crude prices and Treasury yields dropped on hopes for a deal in the Iran war.

Palantir Technologies soared nearly 30% and was ‌on track for its biggest daily percentage gain since February 2024, after raising its annual revenue forecast. Caterpillar, seen as a bellwether for the global industrial economy, jumped about 6% after raising its annual revenue growth forecast, as the buildout of AI data centers has fueled demand for its power-generation and construction equipment.

The move in Caterpillar made it the biggest boost to the Dow Industrials, accounting for over 300 points to the upside for the ‌venerable average. Investors have been closely monitoring results from AI-linked companies this earnings season for any signs the massive spending in the space will be justified.

OIL PRICES DROP ON IRAN DEAL HOPES Also supporting ‌stocks was a drop of about 5% in crude prices after a Qatari official said efforts to secure a diplomatic resolution to the conflict were continuing, while U.S. Treasury Secretary Scott Bessent said a deal with Iran to reopen the Strait of Hormuz could come within the next two days.

The drop in oil prices also dented expectations for a rate hike from the Federal Reserve at its September meeting, causing a retreat in U.S. Treasury yields. "I don't sense one ounce of skepticism among investors, ⁠from oil to ​interest rates to equities," said Jack Ablin, chief investment ⁠strategist and founding partner at Cresset Capital Management in Chicago.

"The earnings reports were certainly supportive, and that's great news, but I'm not sure a handful of earnings reports justifies new records in the S&P." MAJOR AVERAGES SURGE HIGHER

The Dow Jones Industrial Average rose ⁠998.40 points, or 1.88%, to 54,175.70, the S&P 500 gained 144.39 points, or 1.90%, to 7,744.97 and the Nasdaq Composite gained 697.17 points, or 2.69%, to 26,610.62. The Dow secured its first closing high since July 6 on Monday, while the ​S&P 500 on Tuesday notched its first intraday record since July 2.

Chip stocks, also seen as beneficiaries of AI-spending, surged. The Philadelphia Semiconductor index shot up nearly 7% and was on ⁠track for its fourth straight daily gain after tumbling 20.6% in July. The S&P 500 tech sector gained 4.5% as the best performing of the 11 major S&P sectors.

Results from corporate earnings this quarter have mostly been robust. Of the 304 companies in the ⁠S&P ​500 that have reported second-quarter earnings as of Friday, 85.2% have beaten estimates, versus the long-term average of 67.5%, according to LSEG data, with every major S&P sector showing profit growth. Elon Musk's SpaceX will release its first earnings report since its public debut after markets close. The company's shares jumped more than 8%. McDonald's edged up 0.1% despite reporting disappointing results, while Pfizer gained 1.1% after reporting upbeat quarterly results.

On the ⁠data front, job openings dropped in June, weighed down by a sharp decline in the healthcare and social assistance sector, but a rise in hiring and low layoffs suggested the labor market remained ⁠stable. The data is the first in a series ⁠of reports on the labor market this week that will culminate in Friday's government payrolls report. Advancing issues outnumbered decliners by a 2.11-to-1 ratio on the NYSE and by a 2.95-to-1 ratio on the Nasdaq.

The S&P 500 posted 25 new 52-week highs and three new lows, while the Nasdaq Composite recorded 117 ‌new highs and 43 new lows.