Wall Street Approaches Record High as Brent Oil Prices Decline

The S&P 500 rose 0.2%, nearing its all-time high set last month. The Dow Jones Industrial Average gained 124 points, or 0.2%, by 9:35 a.m. Eastern time, while the Nasdaq composite increased 0.4% toward its own record.

The stock market received a boost following a 1.9% decrease in Brent crude prices, which dropped to $98.46, down from nearly $110 last week. This price remains significantly higher than the approximately $72 before the onset of the conflict with Iran. The fluctuating price reflects uncertainty regarding when oil supplies from the Middle East will stabilize.

The recent decline in oil prices has also contributed to lower Treasury yields, easing some pressure on the stock market. Last week, the yield on the 10-year Treasury surpassed 5% for the first time since 2023. Higher yields can hinder economic growth by increasing borrowing costs. On Tuesday, the 10-year yield slightly decreased to 4.95% from 4.96%, still above the pre-war level of 3.97%.

Companies reliant on fuel reported strong stock performances due to lower oil prices potentially alleviating cost pressures. For instance, Carnival, a cruise operator, saw its stock climb 4%, while American Airlines rose 2.2%.

AutoZone increased by 2.7% after reporting a stronger-than-expected profit for the latest quarter, although its revenue did not meet expectations. CEO Phil Daniele noted a challenging selling environment in early months of the quarter, but indicated optimism for future sales growth.

In contrast, Thor Industries, which sells recreational vehicles, experienced a more subdued market sentiment. CEO Bob Martin pointed out that high fuel costs, elevated interest rates, and persistent inflation were straining customer budgets. Nevertheless, the company's stock rose 0.9% after exceeding profit expectations for the latest quarter.

Strong corporate earnings have played a significant role in propelling the U.S. stock market near its all-time high despite the backdrop of elevated oil prices, inflation concerns, and uncertainty surrounding the artificial intelligence sector. Analysts anticipate overall growth of nearly 29% for S&P 500 companies in the third quarter compared to the previous year, as per FactSet. If accurate, this would mark the third consecutive quarter of growth above 25%, reflecting a historical trend where stock prices follow corporate profits.

On Holding’s stock surged 10.3% after the Swiss sneaker and sportswear brand revealed its financial goals and approved a stock buyback plan of up to $1 billion through 2029, benefiting shareholders and enhancing per-share performance.

Conversely, several AI stocks, especially in the semiconductor industry, lagged behind. Advanced Micro Devices declined by 0.4%, a modest drop following a nearly 10% increase the day prior. The AI sector has faced scrutiny amid concerns of inflated prices and calls for a slowdown from industry leaders for safety reasons.

In international markets, stock indexes saw gains across Europe and Asia, with Hong Kong rising 0.2% and Shanghai increasing 0.1%. This upward trend followed Alibaba's announcement of new AI chip technologies, which it claimed to be China’s most powerful AI chip, just ahead of a meeting between Chinese and U.S. leaders where AI competition is expected to be a key topic.