Stocks are surging to fresh records as the US says a deal is close to reopen the Strait of Hormuz
A fresh risk-on rally pushed stocks to records on Tuesday.
US stocks have clawed their way back to records after a volatile rotation in the AI trade sent investors on a roller coaster ride in July. The Dow Jones Industrial Average and S&P 500 broke through to new highs as traders were encouraged by Treasury Secretary Scott Bessent’s comments that the US and Iran could strike deal to open the Strait of Hormuz this week, leading oil prices to tumble further.
Speaking to CNBC on Tuesday, Bessent said a deal to reopen the highly important shipping lane could come as soon as Tuesday or Wednesday, with the US and Iran moving “towards a more normalized position” amid the war.
Brent crude, the international benchmark, fell another 5% below the $80 mark, extending its losses from Monday as optimism for a resolution grew. West Texas Intermediate crude also dropped 5% to trade around $75 a barrel.
The 10-year US Treasury yield, a gauge for long-term interest rate expectations, dropped 5 basis points to trade around 4.62%.
Major indexes soared, with the Dow soaring 900 points by Tuesday afternoon.
Here’s where US indexes stood around 12:20 p.m. ET on Tuesday:
The Nasdaq 100 climbed nearly 3% by midday as investors piled into AI and chip names that struggled last month. The hyperscalers were a particular area of focus, with most Magnificent Seven giants climbing during the session. Amazon, which notched a $3 trillion valuation for the first-ever time this week, dipped 2%.
The market was also cheering a round of solid earnings reports in the tech sector. Palantir shares rocketed 27% higher as the firm reported “otherworldly” commercial revenue, beating estimates. Caterpillar, the data center equipment supplier, also surged 6% after it beat on earnings estimates.
Here were some of the most notable moves in the tech sector:
The recent rebound in large AI spenders may be a sign that the artificial intelligence trade is starting a “long-overdue rebalancing,” Bret Kenwell, a US investment and options analyst at eToro told Business Insider.
“Now, with valuations compressed, sentiment bruised, and massive AI investments beginning to translate into tangible revenue growth, Wall Street may be rethinking its retreat from mega-cap tech,” Kenwell said.
“The bull market is reasserting itself through broader participation, falling volatility, and strong rotational activity. While a push to new record highs is bullish, supportive evidence of improving market breadth is needed for short-term momentum to become a sustainable uptrend,” Piper Sandler strategists wrote in a note.
Investors also have their eye on SpaceX, which is due for its first-ever earnings report Tuesday after the closing bell. Markets are bracing for a volatile round of trading this week, given that the space exploration firm was not profitable last year and is unlocking its first wave of insider shares on Thursday.