NEW YORK – The S&P 500 and the Dow closed at record highs on Aug 4, 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.
Palantir Technologies soared nearly 30 per cent 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 after raising its annual revenue growth forecast, as the buildout of AI data centres has fuelled demand for its power-generation and construction equipment.
The move in Caterpillar made it the biggest boost to the Dow Industrials, accounting for more than 300 points to the upside for the venerable 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 on Iran deal hopes
Also supporting stocks was a drop of about 5 per cent in crude prices after a Qatari official said efforts to secure a diplomatic resolution to the conflict were continuing, while US 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 per cent from 67.2 per cent in the prior session, according to CME FedWatch, which contributed to a retreat in US Treasury yields.
“I don’t sense one ounce of scepticism 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 averages surge higher
According to preliminary data, the S&P 500 gained 137.20 points, or 1.81 per cent, to end at 7,737.70 points, while the Nasdaq Composite gained 668.10 points, or 2.58 per cent, to 26,581.99.
The Dow Jones Industrial Average rose 912.25 points, or 1.72 per cent, to 54,090.66.
The Dow recorded a closing high for a second straight day after notching its first since July 6 on Aug 3, while the S&P 500 on Aug 4 secured its first closing record since July 2.
Chip stocks, also seen as beneficiaries of AI-spending, surged. The Philadelphia Semiconductor index shot up nearly 7 per cent and rose for a fourth straight session after tumbling 20.6 per cent in July.
The S&P 500 tech sector gained 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 have reported second-quarter earnings as of July 31, 85.2 per cent have beaten estimates, versus the long-term average of 67.5 per cent, according to LSEG data, with every major S&P sector showing profit growth.
Elon Musk’s SpaceX will release its first earnings report since its public debut after markets close. The company’s shares jumped before the announcement.
McDonald’s advanced despite reporting disappointing results, while Pfizer gained 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 labour market remained stable. The data is the first in a series of reports on the labour market this week that will culminate in the Aug 7 government payrolls report. REUTERS
