US stock markets surged to record highs, with the S&P 500 climbing 1.8% to 7,737 and the Dow Jones Industrial Average rising 1.7% to 54,085.88. The Nasdaq Composite gained 2.6%. This rally was primarily fueled by robust corporate earnings reports, particularly from companies tied to AI infrastructure, and growing hopes for a diplomatic resolution to reopen the Strait of Hormuz. Analysts noted that three-quarters of S&P 500 companies have reported results, with overall profit growth projected at 50%.
Key companies contributed significantly to the market's performance. Palantir Technologies saw its shares jump 29.5% after reporting second-quarter revenue of $1.94 billion, exceeding forecasts. Caterpillar also lifted its revenue growth outlook due to increased demand for power-generation and construction equipment for data-center construction. The Philadelphia Semiconductor Index (SOX) rose 6.6%, highlighting strong investor confidence in AI-related sectors.
Optimism regarding the Strait of Hormuz played a crucial role, with US and Iranian officials signaling progress in talks aimed at restoring shipping. Brent crude, the international benchmark for oil prices, ticked up 0.8% to $79.98 per barrel for October delivery, after falling about 5% overnight. This diplomatic progress helped alleviate concerns about inflation, as the US one-year inflation swap fell to 1.80% and the yield on 10-year US Treasuries dropped below 4.60%. US Treasury Secretary Scott Bessent indicated that an agreement could be reached "today or tomorrow," with US Secretary of State Marco Rubio also expressing hope for a deal "very shortly."
