NEW YORK – Wall Street experienced a notable upswing on Tuesday, primarily driven by renewed gains in artificial intelligence (AI) related stocks, particularly computer chip manufacturers. This market strength emerged despite a significant rise in Brent crude oil prices, which neared the $92 per barrel mark, reigniting fears of accelerating inflation and potential central bank intervention.
The S&P 500 climbed 0.9%, while the Dow Jones Industrial Average advanced 361 points, or 0.7%, as of 2:14 p.m. Eastern time. The technology-heavy Nasdaq composite saw an even more substantial gain, rising 1.4%. This marked a second consecutive day of increases for AI stocks, which had previously experienced a period of pressure following a rapid ascent and concerns that their valuations had become stretched. Worries persist that investment in AI might wane if it fails to deliver expected levels of profit and productivity.
AI’s Resurgence and Market Performance
At the forefront of Tuesday’s rally were key AI beneficiaries. Micron Technology surged an impressive 12.7%, building on its 1.9% gain from the previous day, and recovering significantly from a 13.3% drop last week. Nvidia, another bellwether in the AI sector, added 1.5%. These two companies were identified as the strongest forces lifting the S&P 500, underscoring the market’s continued focus on the AI boom, particularly in chips and data centers.
Globally, the impact of AI enthusiasm was also evident. South Korea’s Kospi index jumped 3.6%, largely propelled by strong gains in its two dominant stocks, Samsung Electronics and SK Hynix, both major beneficiaries of the AI surge. The Kospi has soared 60% year-to-date, even after experiencing a 20% decline so far in July.
The Oil Price Conundrum and Macroeconomic Headwinds
The market’s resilience was tested by a significant climb in oil prices. Brent crude oil topped $90 per barrel, rising 2% to $91.01, and briefly nearing $92 for the first time in over five weeks. This increase is attributed to continued attacks between the United States and Iran, pushing prices up from less than $72 early this month, a level seen before the conflict with Iran escalated.
Rising oil prices present a substantial macroeconomic threat, potentially reaccelerating inflation at a time when price increases had been slowing more than economists anticipated. Such a development could compel the Federal Reserve and other central banks to raise interest rates further to contain inflation. This, in turn, risks slowing economies and undercutting prices for stocks and other investments. The yield on the 10-year Treasury, a key indicator of borrowing costs, edged up to 4.63% from 4.60% late Monday, and significantly higher than the 3.97% observed before the war with Iran began.
Corporate Earnings Provide Support
Adding another layer of support to the market were several stronger-than-expected profit reports from major U.S. companies. Diversified industrial giant 3M climbed 6.9% after surpassing analysts’ expectations for both profit and revenue in its latest quarter, and subsequently raising its forecast for full-year 2026 profit.
Toy maker Hasbro rallied 7.9% after reporting that its popular Magic: The Gathering game achieved over $500 million in revenue for a quarter for the first time, leading the company to raise its full-year revenue forecast. General Motors also saw its shares cruise 4.8% higher, as the automaker’s profit and revenue for the latest quarter beat analysts’ expectations, with CEO Mary Barra noting strong demand in North America.
Pockets of Weakness and International Markets
Despite the broader market strength, some companies faced headwinds. Danaher, a life sciences company, slid 11.4% even after topping analysts’ profit and revenue expectations. Analysts pointed to its forecast for an underlying measure of revenue growth for the summer, which was weaker than Wall Street anticipated. Homebuilder D.R. Horton slipped 0.8% despite exceeding profit and revenue expectations, as Executive Chairman David Auld highlighted ongoing affordability concerns in the housing market and caution among potential home buyers. Mortgage rates have climbed to their highest level in nearly a year due to higher Treasury yields, potentially forcing D.R. Horton to offer more incentives and impacting future profits.
In international stock markets, European indexes saw modest gains, with the United Kingdom’s FTSE 100 adding 0.6%. Asian markets showed more varied performance; Tokyo’s Nikkei 225 climbed 3.3% after a holiday, while indexes rose 1.8% in Shanghai and edged down by less than 0.1% in Hong Kong.
Companies across the board are under considerable pressure to deliver robust growth in profit and revenue, given the elevated levels of their stock prices. Major indexes are currently near their record highs, even with the recent volatility observed in AI stocks, indicating a market grappling with both technological optimism and persistent macroeconomic uncertainties.
