S&P 500, Nasdaq reach record closing highs as focus pivots to earnings

On Tuesday, US stocks saw a broad rally and set new record closing highs, with the S&P 500 and Nasdaq reaching all-time highs. This positive trend came as crude prices stabilized and US Treasury yields eased, providing respite from investor concerns. The Dow Jones Industrial Average was just over 5% shy of its record closing level, reached on August 5.

Oliver Pursche, a senior advisor at Wealthspire Advisors, noted that the market's focus has shifted to the upcoming third-quarter earnings season as oil prices stabilize or decline, reducing anxiety about energy-driven inflation. Six of the Magnificent Seven AI-linked megacap firms advanced, boosting gains, while small-caps lagged behind.

The AI trade remains strong, with the Philadelphia SE Semiconductor Index gaining. US imports of capital goods rose by 4.4% in August, while the trade deficit grew by 13.7%. Financial markets now expect a lower probability of a second consecutive Fed rate hike at this month's meeting, down from 50.9% to 19.4%. Despite oil price concerns, a G7 agreement to release emergency diesel and crude stockpiles helped stabilize crude futures.

The Dow Jones Industrial Average climbed 0.49% to 51,521.04, the S&P 500 rose 0.58% to 7,818.95, and the Nasdaq Composite gained 0.45% to 27,599.79. All 11 major sectors in the S&P 500 gained, with utilities leading the way. Third-quarter earnings season begins next week, with analysts projecting a 30.6% aggregate annual S&P 500 earnings growth, driven by a 114.7% expected surge in energy earnings and a 66.5% surge in tech results.

Marvell Technology and AMD also saw gains following strong revenue forecasts and CEO Lisa Su's plans for increased chip supply. Option Care Health surged 32.7% after being acquired by McKesson and Clayton Dubilier & Rice for about $5.8 billion.