Wall Street closed at all-time highs Tuesday, with the Dow Jones Industrial Average jumping 907 points to 54,091.42, the S&P 500 rising 1.79% to 7,736.52, and the Nasdaq Composite surging 2.59% to 26,584.99. A wave of better-than-expected corporate earnings and a sharp drop in oil prices drove the broad rally, pushing major indexes to new records.
Earnings season delivers above-average beats
Of the 304 S&P 500 companies that have reported second-quarter results so far, 85.2% beat analyst earnings estimates. That's well above the long-term average of 67.5%. Caterpillar raised its annual revenue growth forecast, citing demand from AI data center construction, and its stock rose 5.6%. Palantir Technologies also lifted its annual revenue forecast, sending shares up 29.5% — the company's best single-day gain since February 2024.
The Philadelphia Semiconductor Index jumped 6.6%, extending its rebound after a 20.6% drop in July. The tech-heavy index's recovery added to the positive sentiment.
Oil slide fuels rate-cut expectations
Brent crude fell 5.3% to $79.36 a barrel on hopes for a diplomatic resolution to the Iran war that could reopen the Strait of Hormuz. The drop in oil prices pushed the odds of a September rate hike down to 56.9% from 67.2% a day earlier. Two-year Treasury yields fell to a two-week low as traders bet on a less aggressive Federal Reserve.
Lower oil prices tend to ease inflation pressures, giving the Fed more room to pause or cut rates. The bond market's reaction reflected that shift in expectations.
Caution amid the rally
Not everyone is convinced the rally has legs. Jack Ablin, chief investment strategist at Cresset Capital Management, said he doesn't sense skepticism in the market and questioned whether a handful of earnings reports justify new S&P records. His caution stands in contrast to the broader optimism.
Oliver Pursche, senior vice president at Wealthspire Advisors, attributed the rally to stronger earnings and expectations. He pointed to the breadth of beats as a sign of underlying corporate health.
Global markets also joined the party. The pan-European STOXX 600 closed at a record 656.86, up 0.73%. MSCI's All Country World Index gained 1.30% and hit an intraday record.
SpaceX's mixed debut
SpaceX reported its first earnings as a public company, beating Wall Street estimates on revenue that surged 92% year-over-year. But shares fell roughly 8% in after-hours trading, a reminder that even strong results can get punished in a market that's already priced for perfection. The after-hours move sets up a potentially volatile open for the stock on Wednesday.
