U.S. stocks surged on Tuesday: the S&P 500 climbed nearly 1% intraday to 7,830 points, its first intraday record in almost two months and its 28th record high of 2026. The Nasdaq Composite extended Monday's record close, and the Dow added nearly 400 points. The AI trade remains the engine — Nvidia hit another intraday record as it closed in on a $6 trillion market cap, accounting for more than 8% of the S&P 500 and up 6% this month.
The rally's direct fuel was relief on two fronts. The 10-year Treasury yield pulled back to 5.26% after touching 5.35% on Monday — its highest since April 2002 — while the 30-year yield fell to 5.63% from Monday's record 5.702%. Oil dropped too: Brent fell about 2% to near $98 a barrel and WTI to around $88, helped by increased tanker traffic through the Strait of Hormuz, resilient Middle Eastern exports and a G7 pledge to release emergency stockpiles. Still, Brent is up more than 30% since the start of the war with Iran, and traders are watching Houthi attacks on Saudi targets.
A softer-than-expected payrolls report last week eased expectations of a Fed hike, with CME FedWatch data showing traders now see a 78% chance the central bank holds rates steady this month — though a December hike remains largely priced in. "The rally in the market was tech led once again," said Kyle Rodda, senior analyst at Capital.com, with easing rate-hike uncertainty and slightly moderated geopolitical risk letting investors "focus on the extraordinary earnings growth being delivered by AI names." Goldman Sachs estimates consensus forecasts point to 27% S&P 500 earnings growth last quarter, more than half of it from AI infrastructure spending.
Wall Street's caution centers on how narrow the rally is. Over the past month, tech is the only sector to have posted gains; real estate, financials, materials and utilities have each dropped more than 5% as higher borrowing costs weigh on the outlook. Asia followed higher on Tuesday — MSCI's Asia-Pacific index rose 0.2% and Japan's Nikkei gained 0.7% — but the euro languished near 17-month lows, French bonds were dumped after an underwhelming budget, and Spain's prime minister called a snap election. Third-quarter earnings season kicks off next week with the big banks first — whether the AI earnings story delivers will be decided by those reports.