U.S. stock indexes climbed on Tuesday, with the Dow Jones Industrial Average reaching a 1-week high as investors weighed easing geopolitical tensions and a sharp drop in crude oil. The S&P 500 rose 0.65%, the Dow advanced 1.08%, and the Nasdaq 100 gained 0.56%, while equity-linked futures for September also pointed higher.
Oil prices fell more than 5% after the U.S. and Iran reportedly held off on further escalation for a third straight day, helping pressure Treasury yields lower as inflation expectations eased. At the same time, mega-cap technology earnings are underway this week, supporting demand for artificial-intelligence-related stocks.
Key takeaways
- Price move: The S&P 500 gained 0.65%, the Dow rose 1.08%, and the Nasdaq 100 climbed 0.56%.
- Catalyst: Markets rallied as geopolitical risk appeared to cool and crude oil prices plunged, pulling the 10-year Treasury yield down.
- Another driver: Optimism around the upcoming wave of large technology earnings helped lift AI-linked stocks.
- Rates implication: The drop in oil supported lower yields, aligning with investor expectations for the path of policy rates.
- Sector read: Software and AI infrastructure names outperformed, while energy stocks declined alongside crude.
What drove the move
Geopolitical and energy developments were central to the day’s risk-on tone. According to reporting cited in the article, the U.S. signaled diplomacy was being given “some space,” while tensions in the Middle East eased enough to push crude sharply lower. The reduced oil pressure fed directly into bond markets: the 10-year Treasury yield fell about 3 basis points to 4.65%, reflecting weaker inflation expectations.
In economic data, June capital goods orders excluding defense and aircraft came in stronger than forecast. The report said nondefense capital goods new orders and parts rose 0.9% month over month versus expectations of 0.7%, providing additional support for equities by reinforcing growth momentum.
Equities also benefited from positioning ahead of earnings. The article cited Bloomberg Intelligence estimates that second-quarter earnings could rise 23%, near the pace of Q1’s stronger results. It also noted that AI infrastructure is expected to contribute a large share of S&P 500 earnings-per-share growth in the quarter. According to Bloomberg data referenced in the piece, 86% of the 135 S&P 500 companies that had reported second-quarter earnings beat estimates.
Market reaction across sectors and regions
Within equities, AI and software were the key winners. The article highlighted broad strength among software stocks, including Atlassian, Workday, Oracle, and other enterprise technology names, as well as gains in select mega-caps. It also pointed to leadership from chip and AI infrastructure exposure, consistent with investors continuing to price in sustained AI spending.
Airline and cruise stocks also advanced as cheaper fuel boosted sentiment. The article cited gains across Alaska Air Group and Carnival, along with United Airlines, Norwegian Cruise Line, and other carriers.
Energy stocks moved in the opposite direction as crude prices slid. Producers and services names cited in the article, including ConocoPhillips and ExxonMobil, were down more than 2%, while several energy services companies fell modestly.
Overseas markets were higher. The article reported gains in European equities, with the Euro Stoxx 50 rising to a 2.5-week high, and strength in Asia, including the Shanghai Composite and Japan’s Nikkei 225.
Rates and policy expectations
In Treasuries, the article stated that September 10-year T-notes rose with the yield down 2.6 basis points to 4.651%, attributing the move largely to the oil selloff and its effect on inflation expectations. It also noted supply into the day, with Treasury auctions scheduled, including 2-year and 5-year note sales.
European rates were also lower. The German 10-year bund yield and the UK 10-year gilt yield declined in the article’s reporting. It also cited a rise in Germany’s IFO business confidence index to a five-month high, which the piece described as stronger than expected.
On policy pricing, the article said markets were discounting a 34% chance of a 25 basis point U.S. rate hike at the next FOMC meeting. For the ECB, it reported an 88% probability of a 25 basis point rate increase at the September 10 policy decision.
Notable company moves
- M&A-related surge: Forte Biosciences jumped after Argenx agreed to acquire the company for about $2.2 billion, or $77 per share, according to the article.
- Analyst-driven moves: D-Wave Quantum, IonQ, Rocket Lab, and others rose after analysts reinstated or upgraded coverage, the article said.
- Results and guidance: The article said Baker Hughes led among gainers after reporting Q2 revenue of $6.74 billion versus a consensus of $6.51 billion.
- Mixed reactions: MapLight Therapeutics fell sharply after trial results did not meet what the article described as an “upside case” scenario. Nvidia also declined after disclosing a “substantial” investment in an AI startup, according to the piece.
What to watch next
Traders will likely focus on how megacap earnings and guidance shape the market’s AI growth narrative, especially as more large-cap results are scheduled for this week. On the macro calendar, next steps hinge on whether bond yields remain anchored by falling energy prices and how investors interpret policy expectations ahead of upcoming central bank meetings.
