S&P 500, Nasdaq notch record closes as oil eases, AI rally reignites

US stocks ended higher Tuesday, pushing the S&P 500 and the Nasdaq Composite to record closing highs, as stabilizing oil prices and lower Treasury yields allowed investors to look past weeks of geopolitical and inflation worries.

The S&P 500 gained 0.6% to 7,818.95, while the Nasdaq rose 0.5% to 27,599.79. The Dow Jones Industrial Average added 0.5% to 51,521.04 but remains roughly 5% below its record close from August 5, according to Reuters reports.

The rally extended into a fourth straight day, with Brent crude falling 1.1% to $99.19 per barrel, easing from near $110 a few weeks ago. The drop in oil prices helped send the yield on the 10-year US Treasury note to 5.26% from 5.31% late Monday, per data cited by the Korea Times.

“When oil prices stabilise or move lower, that causes yields to move down because there’s less anxiety about energy-driven inflation, which in turn is helping lift stocks higher,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York, in comments carried by Reuters. “This has been the narrative of the market for the last couple of weeks.”

AI trade powers rally

Six of the “Magnificent Seven” group of mega-cap AI-linked firms advanced, bolstering gains. Small-cap stocks lagged their larger-cap counterparts. The Philadelphia SE Semiconductor Index gained ground, reflecting what analysts called a resurgent AI trade.

Marvell Technology climbed 5.8% after the chip designer raised its 2028 revenue forecast on strong demand for data centre chips. Advanced Micro Devices rose 2.8% after CEO Lisa Su said the company plans to substantially increase chip supply in 2027 to meet booming AI demand, as reported by Reuters. Nvidia Corp.’s market value approached US$6 trillion, according to the Financial Post.

Constellation Energy jumped 12.3% after Alphabet entered into a 3,590-megawatt power deal with the company. The Korea Times pegged the gain at 14%, calling the deal a “tidal wave” that underscores booming demand for electricity from AI data centers.

Option Care Health soared 32.7% after McKesson and private equity firm Clayton Dubilier & Rice agreed to buy the infusion therapy provider in a deal worth about US$5.8 billion, including debt.

Oil eases, Fed bets shift

Crude prices had surged amid the war with Iran, stoking inflation fears and boosting expectations for another Federal Reserve rate hike. But supply worries eased after the Group of Seven nations agreed to release emergency diesel and crude stockpiles, helping stabilize front-month WTI and Brent futures.

Financial markets now see a 19.4% probability that the Fed will implement a second consecutive rate hike at its October meeting, down sharply from 50.9% a week ago, according to CME’s FedWatch tool.

“We don’t expect (the Fed) to do anything at the next meeting,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, in Reuters-reported remarks. “But I think they’re in a gradual hiking cycle.”

“High oil prices have hit a broad range of consumers,” Ghriskey added. “That’s one of the reasons for the recent Fed hike.”

Even so, robust domestic demand was evident in August trade data: the US trade deficit grew 13.7% as imports rose to a record high. Capital goods imports rose 4.4%, reflecting AI-related infrastructure spending. Imports on a monthly and annual basis grew 4.3% and 28.4%, respectively.

Earnings season in focus

Third-quarter earnings season kicks off next week, with several large financial firms expected to report next Tuesday. Analysts project S&P 500 earnings growth of 30.6% for the July-to-September period, led by a 114.7% jump in energy earnings and a 66.5% surge in tech results, according to LSEG data cited by Reuters.

Lamb Weston, the frozen potato products maker, reported quarterly profit and revenue that beat projections and raised its full-year profit forecast. Its shares rallied 11.9%, the Korea Times reported. CEO Mike Smith said the company continues to deal with unexpected increases in freight and other expenses amid high inflation.

“We retain strong conviction in the AI growth story, and believe AI-related investment remains a powerful tailwind for the broader equity market,” said Ulrike Hoffmann-Burchardi of UBS Chief Investment Office, as reported by the Financial Post. “A favourable growth environment and robust earnings suggest profit growth can broaden beyond technology.”

Advancing issues outnumbered decliners by a 1.93-to-1 ratio on the New York Stock Exchange. Volume on US exchanges was 16.5 billion shares, compared with the 17.51 billion average over the last 20 trading days.