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Key Takeaways
- The Dow, S&P 500, and Nasdaq all closed at record highs, led by Caterpillar and Palantir earnings beats.
- Of the S&P 500 companies reporting so far, 85.2% topped estimates, well above the 67.5% long-term average.
- European and global indexes also hit records, while falling oil prices added momentum to the rally.
The Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all closed at record highs on Tuesday. Strong earnings from Caterpillar and Palantir Technologies drove the gains, following a stretch of investor uncertainty about artificial intelligence spending. The rally extended into European and global indexes as well.
Caterpillar and Palantir Lead the Rally
The Dow gained 907 points, or 1.71%, to close at 54,091.42. The S&P 500 rose 1.79% to 7,736.52. The Nasdaq Composite jumped 2.59% to a record 26,584.99.
Caterpillar raised its annual revenue growth forecast, citing demand for power-generation equipment tied to AI data center construction. Its stock jumped 5.6%, the single biggest boost to the Dow on the day.
Palantir delivered the sharper move. Shares climbed 29.5% after the company raised its own annual revenue forecast, marking its best single-day gain since February 2024.
Earnings Season Beats the Long-Term Average
The gains reflected a broader pattern across corporate earnings. Of the 304 S&P 500 companies that had reported second-quarter results by Tuesday, 85.2% topped analyst estimates. That compares with a long-term average beat rate of 67.5%.
Semiconductor stocks, viewed by investors as direct beneficiaries of AI spending, rose for a fourth straight session. The Philadelphia Semiconductor Index climbed 6.6% and extended a rebound from a 20.6% drop in July.
Global Markets Join the Record Run
The rally was not confined to U.S. markets. The pan-European STOXX 600 closed at a record, up 0.73% to 656.86, lifted by technology shares and a wave of corporate earnings updates. MSCI’s All Country World Index gained 1.30% and touched an intraday record as well.
Falling oil prices added momentum to the rally. Brent crude fell 5.3% to $79.36 a barrel on hopes for a diplomatic resolution to the Iran war that could reopen the Strait of Hormuz to more shipping traffic.
The drop coincided with a pullback in market pricing for a September rate move, which fell to 56.9% from 67.2%. Two-year Treasury yields touched a two-week low in the same session.
Strategists Split on Whether the Records Are Justified
Not every market participant shared the same read on the rally. Jack Ablin, chief investment strategist at Cresset Capital Management, questioned whether the moves were proportionate to the news driving them, stating:
“I don’t sense one ounce of skepticism among investors, from oil to interest rates to equities. 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.”
Oliver Pursche, senior vice president at Wealthspire Advisors, offered a more constructive view, pointing to stronger earnings and stronger forward expectations as the basis for the rally rather than pure sentiment.
SpaceX’s Earnings Show the Divide Up Close
The split in strategist opinion showed up again hours later. SpaceX’s debut public earnings report beat Wall Street revenue estimates, with sales up 92% year over year.
Shares still fell roughly 8% in after-hours trading once the results landed. Beating estimates has not guaranteed a positive market reaction this earnings season.
Investors and analysts remain split on whether Tuesday’s records reflect durable AI-driven demand or optimism running ahead of confirmation. The remainder of the second-quarter earnings season will provide additional data points either way.
