Global stock markets exhibited resilience on Tuesday, with the Dow Jones Industrial Average climbing 1.2% to 1.3% and the S&P 500 rising nearly 0.4% [finance.yahoo.com] to 0.21% [lse.co.uk]. The S&P 500's equal-weighted version even hit record highs, demonstrating a broad market strength despite weaknesses in specific sectors [SWI swissinfo.ch]. This resilience was attributed to a sharp decline in oil prices, easing inflation worries and sending bond yields lower ahead of the Federal Reserve's decision [SWI swissinfo.ch].
The Nasdaq Composite, however, experienced a more volatile day, initially paring losses to hover near the flat line [finance.yahoo.com] but closing 0.22% lower [lse.co.uk]. This was largely due to an accelerating sell-off in AI-related stocks and a broader rout in semiconductor giants, with the US semiconductor index down 25% from its June 22 high [au.marketscreener.com]. Despite this, the Dow was less than 1% from its record high, and the S&P 500 was 2% away from its peak, indicating a rotation of investor interest into more economically sensitive industries like financials, healthcare, industrials, consumer staples, utilities, and materials [SWI swissinfo.ch, au.marketscreener.com].
Bond markets also saw gains for a third consecutive day, with Treasuries rising due to the retreat in oil prices [SWI swissinfo.ch]. Brent crude fell below $85, with a 5.19% drop to $83.77 a barrel, and West Texas Intermediate dropped 4.06% to $79.26 a barrel [lse.co.uk]. This oil price decline was influenced by eased tensions in the Middle East and discussions between Tehran, Saudi Arabia, and Oman regarding the Strait of Hormuz [SWI swissinfo.ch, lse.co.uk]. The yield on the benchmark US 10-year Treasury note eased by almost five basis points [lse.co.uk], further supporting the market's positive sentiment.
Analysts cited strong profit growth, undemanding valuations, a solid start to second-quarter earnings, and a rebound in US economic forecasts as reasons for the resilience in riskier assets, even in the face of a challenging inflation backdrop [SWI swissinfo.ch]. The decline in oil prices was also seen as supporting the view that the consumer price index may have peaked in May, giving the Fed more time to assess inflation trends [SWI swissinfo.ch]. Investors were also looking ahead to key tech earnings and the Federal Reserve's policy decision, with a 70% probability of the Fed staying on hold versus raising rates [au.marketscreener.com].
