S&P 500, Nasdaq hit record highs as Treasury yields stall, oil slips

The S&P 500 and Nasdaq reached record highs on Tuesday as Treasury yields dropped from multi-year peaks and oil prices declined. Investors focused on upcoming quarterly earnings. Meta, Tesla, Amazon, and Microsoft all saw gains between 0.5% and 1.7%. Nvidia's stock increased by 1.1%, bringing the company's market valuation close to $6 trillion.

Optimism over AI and strong corporate earnings contributed to the bullish market, which began in October 2022 despite higher energy prices and a volatile bond market. David Miller, chief investment officer at Catalyst Funds, noted that the economy remains resilient, but higher interest rates pose a significant hurdle for equities.

The 10-year bond yield declined by 5.3 basis points, with traders now seeing a 79% chance of a rate hold in October, though a December hike remains likely. All 11 S&P 500 sectors ended the day higher, with utilities and real estate leading the gains. The Dow Jones Industrial Average added 359.08 points, the S&P 500 rose 66.16 points, and the Nasdaq Composite gained 228.58 points.

Oil prices fell around 2% due to resilient Middle Eastern crude exports and a G7 release of emergency stocks, easing supply concerns. The third-quarter earnings season begins next week, with analysts projecting S&P 500 earnings to increase over 30% year over year, driven largely by AI-related stocks. Marvell Technology and AMD both saw gains after raising revenue forecasts and announcing plans to increase chip supply for AI demand.

Constellation Energy led gains on the S&P 500, surging 13.9% after Google entered a 3,590-megawatt power deal with the company. Option Care Health jumped 32.7% following a $5.8 billion deal between Alphabet's Google, McKesson, and private equity firm Clayton Dubilier & Rice. Advancing issues outpaced decliners on both the NYSE and Nasdaq, with the S&P 500 recording 21 new 52-week highs and one new low, while the Nasdaq Composite achieved 48 new highs and 123 new lows.