Nasdaq sets record high on AI optimism, oil drops below $100

On Tuesday, the Nasdaq Composite reached a record closing high, while oil prices and Treasury yields declined in a volatile trading session. The rally was driven by AI-related stocks, particularly Micron Technology, as demand for artificial intelligence technologies remained strong and corporate earnings remained robust.

Ulrike Hoffmann-Burchardi, chief investment officer Americas and global head of equities at UBS' Chief Investment Office, expressed optimism about the AI trade, citing increasing adoption, monetization, and capital spending. The Nasdaq Composite rose 0.45%, the S&P 500 was flat, and the Dow Jones Industrial Average fell 0.36%.

Global stock markets also saw modest gains, with the MSCI gauge of international stocks and the pan-European STOXX 600 index both up 0.11% and 0.13%, respectively. Lower oil prices contributed to the risk appetite, following reports that Iran could reopen the Strait of Hormuz within a week if the U.S. eases military pressure and lifts its blockade on Iranian ports. Oil prices had earlier surged due to expectations of a peace deal with Iran, though this hope faded as the midterms approached.

US 10-year Treasury yields dipped slightly to 4.953%, mirroring the decline in oil prices. The dollar strengthened against the euro and Japanese yen, while the Bank of Japan's rate hike last week failed to quell the yen's decline. Investors remain cautious ahead of the Trump-Xi Jinping meeting, hoping for improved relations between the two major economies and potential cooperation on AI.