US stock markets saw a strong rally on Monday, with the S&P 500 jumping 1.5% to 7,600.50, just 0.1% shy of its record set earlier in the summer. The Dow Jones Industrial Average climbed 1.32% or 693.38 points to 53,178.41, marking a new closing record. The Nasdaq Composite also surged, gaining 2.13% or 540.04 points to reach 25,913.90.
This market surge was primarily driven by a significant drop in oil prices. Brent crude sank 4.7% to $83.77 a barrel, and Sep WTI crude oil prices fell more than 5%. The decline followed President Donald Trump's statement over the weekend that he decided to hold off on new strikes against Iran and that talks to reopen the Strait of Hormuz would take place, although Iran disputed the talks were planned. These developments eased fears about escalating conflict in the Middle East and concerns over worsening inflation.
The drop in oil prices also contributed to lower US Treasury yields, with the 10-year T-note yield falling 5 basis points to 4.68%. Strong earnings reports also supported the market, as 86% of the 311 S&P 500 companies that have reported Q2 earnings beat estimates. Forecasts suggest Q2 earnings may increase by 23%, indicating robust corporate performance. Additionally, the July ISM manufacturing index rose by 2.3 to 55.6, exceeding expectations and marking the fastest pace of expansion in four years, signaling strength in the US economy.
