New York (CNN) — The S&P 500 closed at a record high Tuesday, supported by strong corporate earnings, a rebound in tech shares and traders embracing hopes for progress on reopening the Strait of Hormuz.
The S&P 500 surged 1.79% to close at 7,737 points, its first record high in two months. The index surpassed its previous closing peak set in early June.
The Dow soared more than 900 points, or 1.71%, and closed above 54,000 points for the first time ever. The blue-chip index notched back-to-back all-time highs after clinching a record high on Monday, which was its first in a month.
The tech-heavy Nasdaq Composite surged 2.59% on Tuesday. Still, the Nasdaq is about 2% away from its record high set in early June as it recovers from a summer slump.
The S&P 500 and Dow are back at all-time highs while investors digest corporate earnings, reassess bets on artificial intelligence and monitor developments in the Middle East.
The S&P had its best day since April. The Dow had its best day in almost two months. The Nasdaq’s surge was just its best day since last week.
Nerves about AI roiled markets earlier this summer, but a strong earnings season, rotation into different sectors and rebound in tech have helped lift the the major indexes back toward record highs.
Stocks got a boost and oil prices fell after Treasury Secretary Scott Bessent told CNBC early Tuesday that he thinks a deal to open the Strait of Hormuz could happen today or tomorrow.
Brent crude, the global oil benchmark, sank about 5.3% and settled at $79.36 per barrel on Tuesday, its lowest level since July 10.
Traders leaned in to Bessent’s comments, although it remains to be seen how tensions between Washington and Tehran develop. Efforts to resolve the conflict are “in very progressive stages,” Qatar’s Foreign Ministry said Tuesday. Traders have been closely watching shipping traffic out of the Strait of Hormuz to gauge whether oil flows are resuming.
Summer slump and rebound
The S&P 500’s return to record highs marks the end of a two-month swoon that saw the index drop almost 5% from its recent peak in early June before bouncing around and rebounding.
All told, the S&P 500 was always relatively close to record highs this summer. But heightened nerves about AI fueled bouts of market anxiety.
The Nasdaq in late July was down almost 10% from its recent peak, nearing a so-called correction. After a stunning rally earlier this year, semiconductor chipmakers dropped sharply while investors were selective about other tech stocks, putting pressure on the market.
Since a low point on July 29, the Nasdaq has surged almost 9% in a stunning reversal. Tech and AI stocks have bounced back to kick off August.
Sharp single-day swings and extraordinary volatility in South Korea also highlighted the risk of markets being heavily concentrated in one theme like AI. Still, investors monitored earnings and stepped in to buy the dip on some Big Tech and software stocks.
Investors are also navigating the start of Kevin Warsh’s tenure as Federal Reserve chairman at the same time that stubborn inflation has prompted bets that the Fed will continue to hold rates steady, or even hike them, in the coming months.
Dow 54,000
Despite the uncertainty, the Dow on Monday closed above 53,000 points for the second time ever, fueled by strong earnings, before closing above 54,000 points for the first time ever on Tuesday.
In June and July, the healthcare and financial sectors – which the Dow has strong exposure to – outperformed technology. That rotation helped keep the Dow near record highs while the Nasdaq struggled. This month, however, the tech sector is rebounding and already up almost 7%, while the Nasdaq is up almost 5%.
Tech has overall been the leader this year, with the AI boom dominating the stock market. Investors are trying to discern between the companies poised to be winners or losers from AI.
The Dow on Tuesday got a boost from Caterpillar (CAT), which jumped 5.6% after reporting earnings. The company raised its forecast for annual revenue growth because the AI data center buildout is boosting demand for its construction and power equipment.
All told, the Dow is up 12.5% this year. The S&P 500 is up 13% this year, and the Nasdaq is up more than 14%.
Earnings and hope for US-Iran breakthrough
Wall Street is in the midst of quarterly earnings. As of July 31, about 61% of companies in the S&P 500 had reported earnings, with 86% of those companies reporting a positive surprise on earnings per share, a measure of profitability, according to FactSet.
On the whole, companies’ earnings growth is proving robust, with a blended measure the combines results and estimates on pace for the highest earnings growth rate in five years, according to FactSet.
Palantir (PLTR) soared 29% on Tuesday – its second best day on record – after the company reported a surge in revenue due to demand for its AI tools.
Investors on Tuesday afternoon are parsing SpaceX’s first-ever quarterly earnings as a public company. SpaceX shares surged 9% Tuesday to $125 but are below the company’s IPO target price of $135 a share.
Oil prices fell Tuesday, helping to ease nerves about inflation. US Treasury yields fell, pulling back after soaring last week. Stocks have been resilient despite uncertainty over the closure of the Strait of Hormuz.
Stocks are off to a strong start this month. But August to October is historically the S&P 500’s weakest three-month period, according to Bank of America, keeping investors on alert for potential risks.
“Falling oil, lower yields and broadening participation with the (S&P 500) near all-time highs suggest a favorable ‘risk-on’ narrative, but lingering headline risks and lackluster market breadth make the recovery ‘good, not great’,” Craig Johnson, chief market technician at Piper Sandler, said in a note.
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