The S&P 500 and the Dow closed at record highs on Tuesday, powered by ​the latest batch of earnings. AI-related companies like Caterpillar and Palantir helped to assuage demand concerns over AI, while crude prices and Treasury yields ‌dropped on hopes for a deal in the Iran war.

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.

Oil prices drop

Also supporting 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 U.S. Treasury yields.

“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.”

Major indexes surge

The Dow Jones ​Industrial Average rose 907.47 points, or 1.71% to a new high of 54,085.88; the S&P 500 gained 136.02 points, or 1.79% to finish the day at a record 7,736.52 and the Nasdaq Composite gained 671.10 points, or 2.59% to close at 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 surged, likely owing to additional AI-spending announcements. 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.

Results from corporate earnings this quarter have mostly been robust. Of the 304 ​companies in the S&P 500 that had ​reported second-quarter earnings as of Friday, ⁠85.2% had beaten estimates, versus the long-term average of 67.5%, according to LSEG data, with every major S&P sector showing profit growth.

Elon Musk’s SpaceX shares closed up 9.4% during the trading day, and ahead of the company’s highly anticipataed quarterly results. But shares fell more than 7% after it released its first earnings report since going public and revealed higher-than-expected spending on AI.

McDonald’s advanced 1.2% despite reporting disappointing results, while Pfizer gained 1.5% after reporting upbeat quarterly results.

On the ​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 labor market this week that will culminate in Friday’s government payrolls report.