S&P 500, Nasdaq Close at Record Highs as Oil Eases, AI Rally Reignites

U.S. stocks surged to record levels Tuesday, with the S&P 500 and Nasdaq Composite closing at all-time highs as a stabilization in crude oil prices and easing bond yields shifted investor focus to the approaching third-quarter earnings season.

The S&P 500 rose 0.6 percent to end at 7,818.95, topping 7,800 for the first time. The Nasdaq Composite gained 0.5 percent to 27,599.79. The Dow Jones Industrial Average climbed 0.5 percent to 51,521.04, though it remains about 5 percent shy of its record close from August 5.

The benchmark indices are now up nearly 24 percent from their March low, according to one report.

**Oil, Yields Provide Relief**

The day’s advance was driven largely by a retreat in energy prices that soothed inflation fears. Brent crude futures eased to around $99 a barrel, down from nearly $110 in recent weeks. The stabilization followed an agreement among Group of Seven nations to release emergency diesel and crude stockpiles, as reported by multiple outlets.

U.S. Treasury yields also declined, with the 10-year yield falling to 5.26 percent from 5.31 percent late Monday. The move lower provided a reprieve after the bond market had been under pressure for weeks, with the 10-year yield reaching 5.349 percent the prior day — the highest since April 2022.

“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. “This has been the narrative of the market for the last couple of weeks.”

**AI Trade Powers Broad Gains**

The artificial-intelligence trade remained a central driver of the rally. Six of the “Magnificent Seven” group of AI-linked mega-cap firms advanced, with the Philadelphia Semiconductor Index also gaining.

Marvell Technology climbed roughly 6 percent after the chip designer raised its 2028 revenue forecast, citing robust demand for data centre chips. Advanced Micro Devices rose 2.8 percent after CEO Lisa Su told investors the company plans to substantially increase chip supply in 2027 to meet booming AI demand, according to a Reuters report. Nvidia hit a fresh all-time high, with its market value approaching US$6 trillion, as reported by the Financial Post.

Constellation Energy jumped more than 12 percent after entering a major power supply deal with Alphabet, underscoring the growing energy demands of AI data centers.

The rally was broad, with ten of the 11 S&P 500 sectors advancing. Utilities led with a 3 percent gain, while healthcare was the sole decliner. Small-cap stocks lagged their larger-cap counterparts.

**Earnings Optimism Builds Ahead of Q3 Season**

The third-quarter earnings season kicks off next week, with several major financial firms scheduled to report on Tuesday. Expectations are elevated: analysts surveyed by LSEG forecast S&P 500 earnings growth of 30.6 percent year-over-year, led by a 114.7 percent jump in the energy sector and a 66.5 percent surge in technology, according to a Reuters compilation. FactSet projects nearly 30 percent earnings per share growth.

Lamb Weston, the frozen potato products company, offered an early sign of strength. It reported quarterly profit and revenue that topped its own projections and raised its full-year profit forecast, sending its stock up 11.9 percent, according to a report.

“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 quoted by the Financial Post.

**Fed Rate Path Fades as Economic Data Soften**

The Federal Reserve is now seen as less likely to raise rates at its October meeting. Financial markets priced a 19.4 percent probability of a consecutive rate hike, down sharply from 50.9 percent a week earlier, according to CME’s FedWatch tool.

Several Fed officials, including New York Fed President John Williams, have indicated they are in no rush to follow September’s rate increase with another move. Recent data — including softer-than-expected PCE inflation and non-farm payrolls — support that stance, according to one analyst column.

“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. “But I think they’re in a gradual hiking cycle.”

The Fed is scheduled to publish the minutes of its September 15-16 meeting on Wednesday.

**Trade Deficit Widens on Record Imports**

Tuesday’s economic data offered a mixed picture. The Commerce Department reported that the U.S. trade deficit expanded 13.7 percent in August as imports hit a record high. Imports of capital goods rose 4.4 percent, reflecting spending on AI-related infrastructure. On an annual basis, imports surged 28.4 percent, pointing to robust domestic demand that could add to inflationary pressures given war-related supply constraints.

The Atlanta Fed’s GDPNow model trimmed its third-quarter growth estimate by 0.1 percentage point to 3.7 percent following the trade data, according to a Reuters column.

**Deal Activity, Market Breadth**

In merger news, Option Care Health soared nearly 33 percent after McKesson and private equity firm Clayton Dubilier & Rice agreed to acquire the infusion therapy provider for about US$5.8 billion, including debt.

Advancing issues outnumbered decliners by a 1.93-to-1 ratio on the New York Stock Exchange, while the ratio was roughly even on the Nasdaq. Volume on U.S. exchanges totaled 16.5 billion shares, below the 20-day average of 17.51 billion.

Global markets also rose, with Japan’s Nikkei 225 gaining 1.1 percent and European indices up about 0.5 percent. The U.S. dollar slipped 0.3 percent from Monday’s 17-month high.