US stock indexes surged on Tuesday, led by strength in technology and AI-linked shares, while falling oil prices and lower bond yields helped ease concerns about inflation. The S&P 500 closed up 1.79%, the Dow Jones Industrial Average rose 1.71%, and the Nasdaq 100 gained 3.32% to hit a 3-week high.
September S&P 500 futures rose 1.79% and September Nasdaq futures climbed 3.22%, reflecting continued momentum heading into the next session. Investors also digested a mix of earnings upside, weaker economic data, and fresh developments around crude and Middle East shipping.
Key takeaways
- Price move: The S&P 500 gained 1.79% and the Nasdaq 100 jumped 3.32%, supported by a broad rally in growth areas.
- Catalyst: Better-than-expected earnings from major technology names and a sharp drop in crude oil helped lift risk appetite.
- Rates reaction: The 10-year Treasury yield fell 6 basis points to 4.62%, signaling lower inflation expectations.
- Macro offset: June factory orders and JOLTS job openings came in weaker than expected, tempering enthusiasm for the economic outlook.
- Implication: Investors appear to be leaning into earnings momentum while watching whether softening growth data and geopolitical oil risks reintroduce volatility.
Earnings and AI infrastructure pulled the market higher
Technology strength was the dominant driver of Tuesday’s rally. Shares of Palantir Technologies jumped more than 29% after the company reported stronger-than-expected second-quarter revenue and raised its full-year revenue outlook. Zebra Technologies rose more than 28% following results that beat consensus for both adjusted earnings per share and sales, alongside an upward revision to its full-year adjusted EPS forecast.
Caterpillar advanced more than 5% after reporting second-quarter adjusted EPS that was well above analyst expectations.
Beyond earnings standouts, the market also rewarded the broader “AI infrastructure” complex. The Philadelphia Semiconductor Index climbed more than 6% to a one-week high, and several semiconductor and chip-related stocks posted sizable gains, including ARM Holdings and other major names that moved sharply higher across the sector.
Cybersecurity stocks also participated in the rebound, while airlines and cruise operators rose alongside cheaper energy—an echo of how oil price swings can quickly translate into sector-level sentiment.
Crude fell, yields slid, and inflation fears eased
Market sentiment improved after crude oil prices dropped, which helped lower bond yields. The report noted that crude prices reversed an overnight advance as optimism around potential US-Iran steps to reopen the Strait of Hormuz appeared to gain traction, with officials sounding hopeful about an agreement.
At the same time, geopolitical headlines remained in focus. While US and Iranian officials discussed reopening prospects, additional caution surfaced through commentary indicating a deal had not yet been finalized. The market nevertheless reacted to the downshift in oil risk pricing.
The 10-year Treasury yield fell 6 basis points to 4.62% on Tuesday. The yield move suggests investors were willing to reduce inflation-risk premia after crude’s decline, even as they absorbed weaker domestic data.
Economic data softened the outlook
Stocks also faced headwinds from US economic releases that were weaker than expectations. June factory orders unexpectedly fell 0.3% month over month versus expectations for a 0.2% increase. Factory orders excluding transportation fell 0.4% versus expectations for growth of 0.4%, marking the largest decline in 14 months.
Labor market data was also less supportive than hoped. JOLTS job openings decreased by 178,000 to 7.359 million, below the consensus expectation of 7.454 million, pointing to a softer labor-market tone.
The US trade deficit widened to -$73.3 billion, slightly larger than the -$73.0 billion expected, a factor the report flagged as potentially negative for second-quarter gross domestic product.
In context, the market’s rally suggests traders were willing to look past the softening data as long as earnings remained resilient and oil and rates moved in the direction that typically supports equities.
What the market is pricing for central banks and earnings
Investors appeared to keep a close eye on interest-rate expectations. The article said markets were discounting a 58% chance of a 25 basis point rate hike at the next Federal Open Market Committee meeting on September 15-16.
Overseas, European rate expectations remained a key variable for global risk assets, with the report adding that markets were pricing a high probability of an ECB hike at its September 10 meeting.
Earnings expectations also underpinned the upside tone. According to Bloomberg Intelligence estimates cited in the report, second-quarter earnings growth may increase by 23%, near the blowout seen in the first quarter. The report attributed much of the expected earnings contribution to AI spending, noting that AI infrastructure stocks are expected to account for close to 60% of S&P 500 earnings-per-share growth in the quarter.
Market reaction across sectors and notable movers
Semiconductors and AI-adjacent names led with strong gains, while energy stocks and service providers faced pressure as WTI crude fell more than 5% to a three-week low. Airline and cruise operators rose on the oil drop, reflecting more favorable fuel-cost expectations.
The report also highlighted a split in results-driven performance. Shares in companies including Ameresco and Gartner rose sharply after forecast upgrades and results that beat consensus. Meanwhile, Aptiv fell more than 16% after reporting quarterly net sales below expectations and cutting its full-year net sales outlook. NRG Energy declined more than 15% after citing headwinds from lower load and power prices in Texas and higher power supply costs. Chipotle Mexican Grill fell after removing jalapeños from certain stores amid a reported salmonella-linked outbreak investigation. Nike dropped after JPMorgan downgraded the stock to underweight from neutral.
What to watch next: With the market rallying on earnings momentum and the oil-and-rates combination, investors will likely look for continued profit updates, additional guidance from AI- and semiconductor-heavy sectors, and fresh macro prints that could clarify whether the weaker factory orders and labor-market signals persist. Traders will also monitor central-bank messaging ahead of the September FOMC meeting and the next round of policy decisions from the ECB.
