US stock indexes rose on Wednesday as lower crude oil prices and signals of softer inflation pressures boosted sentiment across equities and bonds. The S&P 500 gained about 1.18% and hit a 2.5-week high, while the Dow Industrial Average climbed roughly 1.08% to a 3.5-week high and the Nasdaq 100 added about 1.40%, reaching a one-week peak.
The move was driven by a sharp drop in oil following reports that tensions in the Middle East may be easing, alongside data and Fed commentary that reinforced expectations for a less restrictive inflation path later this year. The yield on the benchmark 10-year Treasury was down about 5 basis points to 4.68% after crude fell more than 5% in the session.
Key takeaways
- Price move: The S&P 500 rose about 1.18%, the Dow gained around 1.08%, and the Nasdaq 100 climbed roughly 1.40%.
- Catalyst: Crude oil slid sharply as geopolitical concerns around the Strait of Hormuz eased, pulling down bond yields.
- Rate backdrop: Commentary from New York Fed President John Williams was described as dovish, and markets continued pricing a relatively low probability of near-term hikes.
- Earnings support: Investors also looked to expectations for strong second-quarter results, with AI-related spending cited as a key driver of earnings growth.
- Implication: Equity strength was tied to both the rates complex and the energy-to-inflation channel, keeping megacap and rate-sensitive sectors in focus.
What drove the market higher
Stocks extended gains after an early read on US manufacturing activity pointed to renewed strength. According to the report referenced in the article, the July ISM manufacturing index rose by 2.3 points to 55.6, above the 53.9 expected by analysts and the fastest pace of expansion in four years.
While the growth signal supported risk assets, a separate housing-related datapoint weighed. The article said US June construction spending fell 0.1% month over month versus expectations for a 0.2% increase.
Fed guidance also helped underpin the tone. The article cited comments from New York Fed President John Williams indicating that interest rates were “well positioned” and that inflation is expected to ease during the second half of the year—an outlook that markets typically interpret as reducing the urgency for aggressive tightening.
Energy, inflation expectations, and bond yields
Lower crude oil prices were central to the rally. The article reported that September WTI crude oil futures were down about 5% as hopes grew that the Strait of Hormuz could reopen amid easing geopolitical tensions. It also referenced actions and signals involving the US and Iran, including President Trump calling off a planned attack and Iran discussing negotiations to improve shipping activity.
As oil fell, Treasury yields moved lower, a combination that can ease concerns about sticky inflation. The 10-year Treasury yield was cited as down roughly 5 basis points to 4.68% in the session. The article also noted that declining energy prices may suppress inflation expectations, supporting demand for duration in rates markets.
Earnings expectations and the rate-implied path
The equity complex also benefited from expectations for solid second-quarter results. According to Bloomberg Intelligence data referenced in the article, Q2 earnings growth may rise about 23%, approaching the strong Q1 pace of about 30% and well above earlier analyst expectations of roughly 12%.
The article added that AI spending is expected to contribute a large portion of earnings growth, with AI infrastructure names projected to account for nearly 60% of the S&P 500’s earnings-per-share growth in Q2. It also said that, based on Bloomberg data, 86% of the 307 S&P 500 companies that had reported Q2 results beat estimates.
On the policy front, the article said markets were pricing a 63% chance of a 25-basis-point rate hike at the next FOMC meeting scheduled for September 15–16. Investors appeared to treat the combination of easing inflation pressures from oil and a more measured Fed stance as a supportive mix for equity multiples, particularly in growth-oriented areas of the market.
Market reaction across sectors and notable movers
The rally carried through much of the stock market, helped by strength in large technology and AI-linked names. The article noted that the “Magnificent Seven” group, excluding Apple, was higher, with Meta Platforms up more than 5% and Amazon.com up more than 4%. It also cited gains across Microsoft, Alphabet, Nvidia, and Tesla, each up more than 3%.
Energy-sensitive equities also reacted to the oil decline. Airline and cruise operators rose as the article reported WTI’s slump. American Airlines, United Airlines, and Alaska Air were all up more than 6%, with Delta Air Lines and Southwest Airlines up more than 4%. Cruise and leisure names including Norwegian Cruise Line, Carnival, and Royal Caribbean were also higher.
Software shares were another source of support, with Oracle up more than 5% and ServiceNow up more than 3%, alongside broad strength across other enterprise software names.
Not all moves were positive. The article cited GameStop down more than 12% after it said it planned to exchange about $1.4 billion in outstanding convertible senior notes for shares of its common stock with certain existing shareholders. Krystal Biotech fell more than 8% after reporting Q2 net product revenues of $119.2 million, below the $122.3 million consensus estimate mentioned in the article. Fair Isaac dropped more than 7% following a downgrade cited by Wolfe Research. Marriott International slipped more than 6% after its Q2 revenue came in below the consensus figure cited in the article, and Circle Internet Group, eBay, and other names were also lower after analyst downgrades.
Bigger picture: global markets and rates developments
Overseas, the article described a mixed picture. Euro Stoxx 50 climbed to a four-week high and rose about 1.19%, while China’s Shanghai Composite fell 0.59% and Japan’s Nikkei 225 closed down about 0.94%.
In rates, the article reported the 10-year German bund yield down about 6.4 basis points to 3.142% and the UK 10-year gilt yield down about 9.8 basis points to 4.952%, reflecting broader cooling in bond yields alongside the oil-driven inflation narrative. It also referenced a revised downward Eurozone manufacturing PMI and weaker German retail sales as part of the European backdrop.
The article further noted support in the Treasury market after the US Treasury said it would 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 the open market.
Investors will likely watch whether crude oil’s decline persists as Middle East developments unfold, alongside upcoming macro releases and the trajectory of Treasury yields. With key earnings scheduled for August 3, including major names listed in the article such as Berkshire Hathaway, Clorox, and Palantir, the next read-through on guidance and margin trends could further shape index direction into the next set of rate expectations.
