US stock markets closed higher on Tuesday, rebounding from three consecutive sessions of losses. The tech-heavy Nasdaq Composite rose 1.3%, the S&P 500 gained 0.9%, and the Dow Jones Industrial Average added 0.7%. This ascent was primarily driven by a significant rebound in chip stocks and stronger-than-expected profit reports from several major US companies. The Philadelphia SE Semiconductor Index rallied 5.2%.
Key individual stock performances included Micron Technology jumping 12.2% and Nvidia adding 2%, contributing significantly to the S&P 500's gains. 3M climbed 7.3% after exceeding analysts' expectations for both profit and revenue and raising its full-year profit forecast. Hasbro also rallied 8.8% following an increase in its annual revenue and profit forecasts. In contrast, Google parent Alphabet closed down around 1.5%, while Tesla advanced 2.5% among the Magnificent Seven. Danaher led S&P 500 decliners with an 11% drop, and defense contractor Northrop Grumman fell 2.5%, while Halliburton dropped 5.5%.
Geopolitical tensions, specifically continued attacks between the United States and Iran, drove oil prices higher. Brent crude futures rose 2.5% to around $91.50 a barrel, briefly nearing $92, their highest level in over five weeks. West Texas Intermediate futures were up 2.1% at $85 a barrel. Rising oil prices are fanning concerns about a reacceleration of inflation, which could prompt central banks like the Federal Reserve to raise interest rates, potentially slowing economies and negatively impacting stock prices. The yield on the 10-year Treasury note also rose to 4.63% from 4.60%.
Investors are now keenly focused on upcoming Q2 earnings reports, with Magnificent Seven members Alphabet and Tesla set to report after the closing bell on Wednesday. Analysts anticipate strong results from Alphabet, with revenue projected to increase by about 20%, driven by a 65% rise in cloud revenue. This report will set expectations for other cloud computing competitors and fellow Mag 7 members like Microsoft and Amazon, who are scheduled to report next week.
Despite the S&P 500's nearly 10% return year-to-date, the Roundhill Magnificent Seven ETF (MAGS) is up less than 2%, indicating that the Mag 7 group, while expected to report approximately 31% earnings growth for Q2, is undergoing a slowdown from 63% in Q1 and has lagged the broader market amidst uncertainties regarding the return on their substantial AI investments.
