U.S. equity markets moved higher on Tuesday, with the S&P 500 and the Dow touching record levels after a round of bullish forecasts from companies tied to the artificial intelligence investment cycle. At the same time, oil prices retreated amid commentary that diplomatic efforts to resolve the Middle East conflict were continuing, relieving some geopolitical risk premium.
Palantir Technologies jumped 17.4% after the software company again raised its annual revenue forecast. Chipmaker On Semiconductor signaled stronger-than-expected quarterly revenue and added roughly 1% following its guidance. Industrial heavyweight Caterpillar climbed 12% after boosting its annual revenue growth outlook - a gain the company attributed in part to demand from the buildout of AI data centers, which has spurred purchases of power-generation and construction equipment.
Investors have been closely parsing results and guidance from AI-linked firms this earnings season for evidence that the large-scale investments in artificial intelligence are translating into material revenue and profit gains. Recent strong quarterly reports from AI leaders such as Microsoft and Amazon provided relief after a volatile July and have helped support broader gains on Wall Street.
"The AI earnings performance has been fantastic, but the big question that investors are asking themselves now is that if it’s going to be sustainable," said Eric Parnell, chief market strategist at Great Valley Advisor Group. "And if it’s sustainable, we’re going to have to start to separate the winners from the losers."
Geopolitical developments also played a role in market moves. Crude prices fell by more than 2% after a Qatari official said efforts to secure a diplomatic resolution to the conflict continued, and U.S. Treasury Secretary Scott Bessent indicated a deal with Iran to reopen the Strait of Hormuz could arrive as soon as Tuesday or Wednesday.
By mid-morning trading at 9:35 a.m. ET, the Dow Jones Industrial Average had risen 647.09 points, or 1.22%, to 53,825.50, marking a fresh all-time high. The Nasdaq Composite was up 304.36 points, or 1.16%, at 26,213.57. The S&P 500 gained 44.06 points, or 0.58%, to 7,644.56, its first record close since June.
Chip stocks were particularly strong, with the Philadelphia Semiconductor index advancing about 4%. That strength in technology partially offset weakness elsewhere: seven of the S&P 500's 11 sectors were trading lower, with energy leading declines on a 2.5% drop as crude prices eased.
Within large-cap technology, shares of hyperscalers were mixed early in the session, with Alphabet and Microsoft trading slightly lower at one point. Other market movers included U.S. photonics companies Coherent and Lumentum, which rose 14% and 7.8% respectively after reports that the U.S. administration is drafting a ban on imports of certain new models of Chinese data-center components. McDonald’s edged up 1.2% despite beating market expectations, while Pfizer slipped about 1% following its quarterly report.
Overall, this earnings season has performed better than the long-term norm. Of the 304 S&P 500 companies that had reported second-quarter results as of last Friday, 85.2% exceeded analysts' estimates, compared with a historical average of 67.5% that beat rate. Market participants will also be watching corporate reporting after the close: SpaceX will release its first earnings report since its public debut, and the company's shares were trading about 4.4% higher earlier in the session.
Later in the trading day, attention will turn to labor market detail when the Labor Department publishes its Job Openings and Labor Turnover Survey (JOLTS) at 10:00 a.m. ET. The survey is expected to show around 7.4 million job openings in June, down from roughly 7.6 million the month prior, a figure that market observers will use to gauge whether labor demand is moderating.
Market breadth favored advancers: on the New York Stock Exchange, advancing issues outnumbered decliners by roughly 1.36-to-1, while on the Nasdaq the ratio was about 2.04-to-1. The S&P 500 recorded 10 new 52-week highs and two new lows; the Nasdaq Composite posted 31 new highs and 18 new lows.
With AI-related revenue trajectory and geopolitical developments driving short-term flows, investors are weighing corporate guidance and upcoming economic data for confirmation that gains can be sustained.