U.S. stock indexes rose on Tuesday as a sharp drop in crude oil eased pressure on inflation expectations, while comments from the Federal Reserve supported the rate outlook. The S&P 500 climbed to a two-week high and was up 0.84%, the Dow Jones Industrial Average gained 1.21% to a 3.5-week high, and the Nasdaq 100 increased 0.47%.
Oil’s decline also pulled bond yields lower. The 10-year Treasury yield was down about 5 basis points to 4.68%, a move investors linked to reduced inflation sensitivity after fears tied to Middle East tensions appeared to cool.
Key takeaways
- Stocks ended the session higher: The S&P 500 rose 0.84%, the Dow gained 1.21%, and the Nasdaq 100 added 0.47%.
- Catalyst: Crude oil prices fell sharply amid signs of easing Middle East tensions, which weighed less on inflation expectations and bond yields.
- Rate backdrop: The 10-year Treasury yield slipped to 4.68% after the oil move; Fed guidance from New York Fed President John Williams was also supportive.
- Earnings remains a tailwind: Expectations for second-quarter earnings growth were cited as strengthening the bullish tone in equities.
- Market tension still showed up: Semiconductors and AI infrastructure stocks lagged on negative carryover from South Korea’s market decline.
What drove the move
Energy was the clearest macro trigger. According to the market move described in the report, September WTI crude oil futures fell about 6% after hopes grew that shipping through the Strait of Hormuz could reopen more quickly. The article cited developments including a call between President Trump and Saudi Crown Prince Mohammed bin Salman, along with comments from Iran indicating that negotiations to increase vessel traffic were making progress. It also referenced a decision by Trump to call off a planned attack on Iran.
Lower oil prices reduced pressure on inflation expectations, and that fed through to Treasuries. The 10-year yield slipped to 4.68%, helping support equity valuations, particularly for rate-sensitive segments.
Alongside oil, Fed-related comments helped reinforce the rate narrative. The report said New York Fed President John Williams took a comparatively dovish tone, saying interest rates remain well positioned and that inflation is expected to ease during the second half of the year. That framing supported both stocks and bonds.
Market reaction across sectors
Investors separated winners from laggards as the macro backdrop improved but company-specific and regional equity signals diverged. Software and parts of enterprise technology helped offset weakness elsewhere. Atlassian and ServiceNow each rose more than 6%, and Microsoft was up more than 5% to lead gains in the Dow.
Energy and travel-related names moved higher in the same direction as crude. Airlines and cruise operators benefited from lower fuel costs, with the article citing gains of more than 5% for American Airlines, United Airlines, and Alaska Air, and increases of more than 4% for Norwegian Cruise Line. Other travel names such as Delta Air Lines, Southwest, Carnival, and Royal Caribbean were also reported up more than 3%.
But chipmakers and AI-infrastructure stocks pulled the other way. The report pointed to negative carryover from South Korea’s Kospi, which fell about 5% the previous session after Korean chip companies dropped. In the U.S., the Philadelphia Semiconductor Index was down more than 3%, and several semiconductor names were reported lower, including Seagate Technology (down more than 6%) and Western Digital and ARM Holdings (each down more than 5%).
Earnings optimism and rate expectations in focus
Beyond oil and Fed language, the equity tape was supported by expectations for second-quarter earnings growth. The article said Bloomberg Intelligence forecasts suggest Q2 earnings may rise about 23%, near the pace of the quarter’s already-strong performance, and it noted that AI spending is expected to account for much of the earnings contribution. It also stated that 86% of the 307 S&P 500 companies that have reported Q2 results beat estimates, according to Bloomberg data.
At the same time, traders were pricing the next steps for monetary policy. The report said markets were discounting a 63% chance of a 25 basis point rate hike at the next FOMC meeting on September 15–16. In parallel, it cited expectations for the ECB, indicating an 87% probability of a 25 basis point rate increase at the next European policy meeting on September 10.
Bigger picture for investors
Overseas markets were mixed, a sign that investors were balancing risk signals from abroad with improving near-term U.S. inflation inputs. The report said the Euro Stoxx 50 rose to a four-week high and gained 0.75%, while China’s Shanghai Composite fell 0.59% and Japan’s Nikkei-225 ended down 0.94%.
In U.S. rates, the report attributed some of the Treasury strength to policy and market infrastructure. It said the U.S. Treasury will allow Japan to use the Foreign and International Monetary Authorities Repo Facility, enabling the Bank of Japan to access dollars using Treasury holdings as collateral rather than selling bonds in open markets to raise cash for yen intervention. European yields were also lower, including the 10-year German bund yield down about 7 basis points to 3.14% and the 10-year UK gilt down about 10 basis points to 4.95%.
Looking ahead, investors will likely track how quickly energy prices stabilize and whether they continue to steer bond yields. The report also highlighted a slate of scheduled earnings on August 3, 2026, including results from Berkshire Hathaway, Clorox, Diamondback Energy, Marriott International, Palantir Technologies, Vertex Pharmaceuticals, and Tyson Foods, among others. With the next FOMC meeting still in focus, traders will also watch incoming inflation and economic data for confirmation that easing pressures remain on track.
