The S&P 500 and the Dow closed at record highs on Tuesday, powered by the latest batch of earnings from AI-related companies such as Caterpillar and Palantir that assuaged demand concerns, while crude prices and Treasury yields dropped on hopes for a deal in the Iran war. The Canadian benchmark stock index also closed at a record.
Palantir Technologies soared 29.5% and recorded its biggest daily percentage gain since February 2024, after raising its annual revenue forecast.
Caterpillar, seen as a bellwether for the global industrial economy, jumped 5.6% after raising its annual revenue growth forecast, as the buildout of AI data centers has fueled demand for its power-generation and construction equipment.
The move in Caterpillar made it the biggest boost to the Dow Industrials, accounting for about 280 to the upside for the average.
Investors have been closely monitoring results from AI-linked companies this earnings season for any signs the massive spending in the space will be justified.
Also supporting U.S. stocks was a drop of about 5% in crude prices after a Qatari official said efforts to secure a diplomatic resolution to the conflict were continuing, while U.S. Treasury Secretary Scott Bessent said a deal with Iran to reopen the Strait of Hormuz could come within the next two days.
The tumble in oil prices also dented expectations for a rate hike from the Federal Reserve at its September meeting down to 56.9% from 67.2% in the prior session, according to CME FedWatch, which contributed to a retreat in Treasury yields in both the U.S. and Canada. The yield on benchmark U.S. 10-year notes fell 5.72 basis points to 4.627%.
“I don’t sense one ounce of skepticism among investors, from oil to interest rates to equities,” said Jack Ablin, chief investment strategist and founding partner at Cresset Capital Management in Chicago. “The earnings reports were certainly supportive, and that’s great news, but I’m not sure a handful of earnings reports justifies new records in the S&P.”
The Dow Jones Industrial Average rose 907.47 points, or 1.71%, to 54,085.88, the S&P 500 gained 136.02 points, or 1.79%, to 7,736.52 and the Nasdaq Composite gained 671.10 points, or 2.59%, to 26,584.99.
The Dow recorded a closing high for a second straight day after notching its first since July 6 on Monday, while the S&P 500 on Tuesday secured its first closing record since July 2.
Chip stocks, also seen as beneficiaries of AI-spending, surged. The Philadelphia Semiconductor index shot up 6.6% and rose for a fourth straight session after tumbling 20.6% in July.
The S&P 500 tech sector gained 4.1% as the best performing of the 11 major S&P sectors.
The S&P/TSX Composite index ended up 575.45 points, or 1.6%, at 35,801.59, marking its biggest one-day gain since April 30 and eclipsing the record closing high it posted last Tuesday. Canadian stocks were closed for a holiday on Monday, and part of the gain was playing catchup to Wall Street’s advance on Monday.
The TSX is now up more than 30% year over year, but its gains over that period have been powered much more by the mining sector than tech.
“The new record highs on both major markets puts an exclamation point on the near-four-year rally from the 2022 lows,” commented Douglas Porter, chief economist with BMO Capital Markets.
“Casting even further back to pre-Covid days, the S&P 500 is now up 172% from the summer of 2019 (7 years ago), or 15% annual gains,” he said in a note. “Even after adjusting for the higher-than-normal inflation of that period, that’s still 11% per year, even before dividends. For the TSX, it’s been 12% and 8.7% since then.”
On Tuesday, the TSX materials group advanced 5.2%, led by a gain of 15.8% for the shares of Americas Gold and Silver. The price of gold was up 0.6% as the drop in oil prices tempered inflation fears.
Technology in Toronto added 7.1%, with shares of electronic equipment company Celestica Inc up 12.9%. Industrials rose 3.1% and heavily weighted financials ended 0.8% higher.
WestJet, majority-owned by Onex Corp said it was gradually resuming operations after reaching a tentative agreement with its flight attendants, ending a strike that caused hundreds of cancellations during a Canadian holiday weekend. Shares of Onex were up 5.6%.
Four of the 10 major sectors fell, including energy, which lost 2.9%.
Data showed that Canada’s trade surplus hit a four-year high of C$3.86 billion in June, when a weaker Canadian dollar helped inflate the value of exports and imports.
Results from U.S. corporate earnings this quarter have mostly been robust. Of the 304 companies in the S&P 500 that have reported second-quarter earnings as of Friday, 85.2% have beaten estimates, versus the long-term average of 67.5%, according to LSEG data, with every major S&P sector showing profit growth.
On the U.S. data front, job openings dropped in June, weighed down by a sharp decline in the healthcare and social assistance sector, but a rise in hiring and low layoffs suggested the labor market remained stable. The data is the first in a series of reports on the labour market this week that will culminate in Friday’s government payrolls report.
Elon Musk’s SpaceX shares closed up 9.4% before reporting its quarterly results. After the closing bell, shares dropped about 4% after announcing its first earnings since going public.
McDonald’s advanced 1.2% despite reporting disappointing results, while Pfizer gained 1.5% after reporting upbeat quarterly results.
Advancing issues outnumbered decliners by a 2.84-to-1 ratio on the NYSE and by a 2.89-to-1 ratio on the Nasdsq.
The S&P 500 posted 27 new 52-week highs and three new lows while the Nasdaq Composite recorded 138 new highs and 54 new lows.
Volume on U.S. exchanges was 18.89 billion shares, compared with the 17.33 billion average for the full session over the last 20 trading days.
Reuters, Globe staff