S&P 500 jumps 1.8% to record as earnings surge, oil slides

Wall Street's rally to records on Tuesday rested on a rare convergence: booming earnings, easing oil prices, and a potential Iran deal.

The S&P 500 jumped 1.8% to close above 7,700 for the first time on Tuesday, its best single-day advance of the year, after Treasury Secretary Scott Bessent said the U.S. and Iran could reach a deal to reopen the Strait of Hormuz. The Dow Jones Industrial Average surged more than 900 points, or 1.8%, to its own record, while the Nasdaq composite climbed 2.6%.

"It's not just one specific news event that's causing the rally. You're getting a succession of events," said Paul Hickey, co-founder at Bespoke Investment Group. "Multiple positive catalysts tend to have longer legs."

Brent crude sank 5.4% to $79.25 a barrel after Bessent told CNBC the two nations "may have a deal today or tomorrow to open the strait and move towards a more normalized position in this conflict." The 10-year Treasury yield fell to 4.63% from 4.70% Monday, easing pressure on borrowing costs for households and corporations. West Texas Intermediate futures declined 3.9% to $77.25 a barrel, while the dollar index edged higher to 99.93.

The rally pushes the S&P 500 up 3.3% for August, with the Nasdaq up nearly 5% in two sessions. Investors now watch whether earnings momentum can sustain the advance into the second half.

Earnings boom underpins the move

Palantir Technologies led the charge, soaring 29.5% after CEO Alex Karp said overall revenue leaped 93% in what he called an "otherworldly" quarter. The AI company also raised its full-year 2026 revenue forecast. Caterpillar climbed 6.6% after posting its first quarter above $20 billion in sales and revenue, with CEO Joe Creed citing strong order rates and a growing backlog across its main businesses.

Companies in the S&P 500 are on track to deliver spring earnings per share growth of nearly 50% from a year earlier, according to FactSet — the biggest jump since 2021, when the economy was recovering from the pandemic. Bank of America Securities pegs second-quarter growth at 27% excluding Alphabet and Amazon, a 4% beat versus consensus at the start of the season.

Chip stocks rally in unison

Semiconductor names powered the tech advance, with the iShares Semiconductor ETF jumping more than 6%. Nvidia rose 2.9%, Broadcom gained 7.5%, and Micron Technology climbed 8.1%. The iShares Expanded Tech-Software Sector ETF added nearly 5% as investors bought a broad array of AI beneficiaries rather than rotating between winners and losers.

The breadth extended overseas. South Korea's Kospi rose 1.6% after swinging 5.1% lower and 17.9% higher in the prior two sessions, its market dominated by AI-linked Samsung Electronics and SK Hynix.

What's at stake

The S&P 500's breakout above the 7,620 resistance level — the June high — triggered additional buying, with the index closing above 7,700 for the first time. Jeff Krumpelman, chief investment strategist at Mariner, predicts the index can reach 8,100 by year-end and 8,400 by mid-2027, provided earnings, inflation, and employment trends hold.

Risks remain. Oil prices have swung between $72 and $102 a barrel through July on uncertainty over the Iran conflict, and analysts warn more volatility could follow if talks collapse. Higher yields — the 10-year remains well above its 3.97% level from before the war — still threaten to slow the economy and undercut equity valuations.

This article is for informational purposes only and does not constitute investment advice.