S&P 500 and Dow hit record highs as AI earnings fuel Wall Street rally

The S&P 500 and Dow Jones Industrial Average climbed to fresh record highs during Tuesday's trading, supported by strong earnings and upbeat guidance from artificial intelligence-related companies, while lower oil prices added to investor optimism amid growing hopes for an agreement that could ease tensions in the Middle East.

In trading, the Dow Jones Industrial Average advanced about 647 points, or 1.22%, to 53,825.50. The Nasdaq Composite gained 1.16% to 26,213.57, while the S&P 500 rose 0.58% to 7,644.56, marking its first record close since June.

Shares of Palantir Technologies surged 17.4% after the company once again raised its full-year revenue forecast. Caterpillar also jumped 12% after lifting its annual revenue growth outlook, benefiting from rising demand for power generation equipment and construction machinery tied to the rapid expansion of AI data centers.

Investors continue to assess earnings from AI-related companies to determine whether the sector's massive investments are generating sustainable returns, following strong results from Microsoft and Amazon last week that helped fuel Wall Street's rebound after a volatile July.

Geopolitical developments

Oil prices declined after a Qatari official confirmed that diplomatic efforts to end the conflict remain ongoing, while US Treasury Secretary Scott Bessent said an agreement with Iran to reopen the Strait of Hormuz could be reached as early as Tuesday or Wednesday.

The earnings season has also continued to deliver strong results, with 85.2% of S&P 500 companies that have reported so far beating analysts' expectations, well above the historical average of 67.5%.