Wall Street powered to fresh record closes on Tuesday, with the S&P 500 and Dow Jones Industrial Average both closing at record highs, while the Nasdaq Composite outperformed with a gain of almost 2.6%. The rally was led by a wave of standout corporate earnings. Caterpillar raised its annual revenue growth forecast on continued demand linked to AI data centre investment, and Palantir also increased its full-year outlook.
More than 80% of S&P 500 companies have now exceeded earnings expectations, reinforcing optimism that corporate profitability remains resilient even against an uncertain macroeconomic backdrop. European equities also reached fresh record highs on Tuesday, led by technology stocks, while Asian markets ended mixed.
Oil prices fell sharply on Tuesday after U.S. and Qatari officials indicated progress towards a diplomatic agreement with Iran that could lead to the reopening of the Strait of Hormuz, easing concerns over global energy supplies. Brent crude declined more than 5% to around $79 per barrel, while WTI fell below $76. The drop in oil prices contributed to lower U.S. Treasury yields, with the 10-year yield easing to around 4.63%, and the U.S. dollar weakening modestly against major currencies.
Asian markets extend the rally into Wednesday
Asian markets rallied on Wednesday, led by Japan and South Korea as technology and semiconductor stocks rebounded on easing oil prices, lower bond yields and renewed optimism around AI. The Nikkei and KOSPI each gained over 3%, while Chinese and Hong Kong equities also advanced. Australia’s ASX 200 reached another record high, supported by miners and financials.
U.S. equity futures were little changed after Tuesday’s record rally, with investors weighing mixed after-hours earnings. SpaceX fell around 8% despite strong results as its elevated AI spending plans unsettled markets, while AMD dropped about 9% after cautious guidance overshadowed solid quarterly earnings. Nvidia outperformed after announcing an AI partnership with SpaceX.
European shares reach new records despite mixed earnings
European equities reached record highs on Tuesday, supported by strong earnings, AI-related stocks and improving risk sentiment. The STOXX 600 gained 0.8%, helped by falling oil prices and easing inflation concerns. Technology shares led gains, while negative corporate updates weighed on Zalando, Lufthansa and BP despite broader market strength.
Zalando and BP were also among the notable decliners, while Lufthansa cut its 2026 profit outlook, citing higher jet fuel costs tied to the Iran war and ongoing operational challenges, with shares falling over 10%. The airline maintained long-term targets but plans capacity discipline, including retiring older aircraft, to reduce costs and improve efficiency.
Currencies and commodities react to easing Middle East tensions
Oil prices fell for a third consecutive session after optimism over a potential U.S.-Iran agreement to reopen the Strait of Hormuz eased supply concerns. Brent traded near $79 and WTI around $75 per barrel. An unexpected rise in U.S. crude inventories added pressure, although geopolitical risks in the region remained elevated.
The retreat in oil prices helped pull U.S. Treasury yields lower, with the 10-year yield easing to around 4.63%. The U.S. dollar weakened on Wednesday as easing Middle East tensions and falling oil prices reduced concerns over inflation and the likelihood of further Fed rate hikes. EUR/USD climbed to around 1.1536, while markets lowered expectations for a September rate increase. Investors now await U.S. labour market data for further clues on Fed policy.
On the data front, June job openings declined in line with expectations but continued to exceed the number of unemployed workers, signalling a resilient labour market. Manufacturing data was softer than expected, as factory orders fell for a second consecutive month, although a healthy backlog of unfilled orders continued to point towards solid underlying business investment, particularly in AI-related infrastructure. Separately, the Federal Reserve is considering reducing its policy meetings from eight to six annually, with additional sessions focused on economic topics. Bank of America said markets could accept the change but warned that poor communication or rapid implementation could disrupt short-term rate markets, including Fed funds futures and OIS trading.
Companies making moves
The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news.
AI and technology earnings dominate the tape
SpaceX reported stronger-than-expected quarterly revenue, driven by robust growth in its Starlink and AI businesses. However, shares fell around 8% after-hours as investors focused on a sharp increase in AI-related capital spending and continued heavy investment requirements, despite improving profitability and ambitious long-term growth targets.
AMD shares fell about 9% after hours despite beating earnings expectations, as investors focused on elevated AI growth expectations and SpaceX’s decision to use Nvidia chips for its AI project. The development reinforced Nvidia’s AI leadership, although AMD continues to secure partnerships with major hyperscalers and remains a key competitor in the accelerator market.
Industrials, consumer and healthcare names post mixed results
Caterpillar delivered a strong second quarter, beating earnings and revenue expectations, with sales rising 24% to a record $20.5 billion. Growth was driven by higher volumes and pricing across all segments, particularly construction and energy. Operating margins improved significantly, while data centre demand supported strength in Power & Energy.
Booking Holdings shares rose after the company beat second quarter profit expectations on resilient U.S. domestic and regional travel demand, though it lowered its full-year gross bookings outlook due to ongoing Middle East conflict pressures on international travel. The company highlighted positive returns from AI investments, including lower customer service costs. SoftBank Corp shares rose after record first quarter revenue and stronger earnings on robust demand for AI, cloud and enterprise services, with enterprise revenue up 11.4% and AI and cloud sales up 31% as businesses expanded infrastructure spending. The company maintained its full-year guidance and dividend outlook.
Cummins shares fell after second quarter earnings missed expectations despite revenue exceeding forecasts. Profitability was impacted by margin pressures in the Engine and Components segments, disappointing investors expecting a stronger recovery. Concerns over earnings momentum and recent insider selling added pressure, although the company maintained solid revenue growth.
Spotify shares fell after second-quarter earnings and revenue narrowly missed expectations. Despite record gross margins, strong free cash flow and premium subscribers reaching 300 million, weaker earnings disappointed investors. Third-quarter revenue guidance topped forecasts, but operating income guidance fell short of expectations.
McDonald’s second-quarter results beat earnings expectations but slightly missed revenue forecasts. Global comparable sales rose 1.3%, supported by growth across all segments, while operating income increased 3%. The company also appointed Skye Anderson as President of McDonald’s USA, replacing Joe Erlinger after more than two decades with the company.
Pfizer raised the lower end of its full-year revenue guidance after second-quarter results beat expectations, supported by strong Eliquis sales. Revenue reached $15.03 billion and adjusted earnings exceeded forecasts. The company maintained its profit outlook while focusing on pipeline growth, including its expansion into the weight-loss drug market.
European and Asian corporate updates weigh on sentiment
Not every update was positive. Lufthansa, Zalando and BP were all notable decliners in Europe, as detailed above. In Asia, Samsung Electronics and SK Hynix are reportedly testing China’s AMEC chipmaking equipment at their Chinese factories as a safeguard against tighter U.S. export restrictions. While large-scale adoption is not planned, the trials could bolster China’s domestic semiconductor equipment industry if they ultimately lead to commercial orders.
US optical component stocks rallied after reports that the FCC is considering banning new Chinese data centre optical hardware imports. The move could benefit suppliers such as Coherent, Lumentum and Corning, while raising costs for hyperscalers. The proposed restrictions aim to strengthen AI infrastructure security but remain subject to change.
Analyst views
Several major banks issued fresh ratings and price target changes, reflecting a broadly constructive but selective view of the AI trade. The calls below are grouped by whether they lean bullish on continued AI-driven growth or more cautious on specific consumer and industrial names.
Bullish calls on AI-driven growth
Citi believes markets are underestimating AI-driven growth, with hyperscaler cloud revenue and backlogs accelerating. Combined 2026 capital expenditure forecasts have risen to $730 billion, driven by AI demand. Google, Microsoft and Amazon’s combined backlog reached $1.69 trillion, signalling sustained investment in AI infrastructure and enterprise adoption.
Societe Generale expects the S&P 500 to reach 8,000, citing broadening earnings strength beyond technology. Record profit margins, robust earnings upgrades and accelerating AI investment support the outlook. The bank favours the equal-weight index, believing cyclical sectors remain resilient despite higher real yields and elevated market leverage.
Bank of America resumed coverage of SK Hynix with a Buy rating, citing its leadership in AI memory chips and expecting a prolonged profit super-cycle. The bank forecasts stronger-than-expected DRAM pricing, sustained hyperscaler investment and over 40% HBM market share, setting a ₩3,000,000 share price target.
Deutsche Bank upgraded Palantir to Buy after strong second-quarter results, highlighting accelerating AI-driven growth and its AIP platform’s ability to deliver enterprise value. Revenue rose 93% year-on-year, led by US Commercial growth. The bank maintained a $200 price target, citing Palantir’s AI leadership and premium valuation potential.
Berenberg upgraded BE Semiconductor Industries to Buy after a sharp share-price decline, maintaining a €240 target. The broker highlighted Besi’s hybrid bonding leadership, strong margins and AI-driven growth potential, expecting significant earnings expansion through 2028 from revenue growth, operating leverage and advanced semiconductor equipment demand.
Cautious calls on consumer and industrial names
Not all coverage was upbeat. JPMorgan downgraded Nike to Underweight, warning that turnaround measures will weigh on earnings through fiscal 2028. The bank expects revenue pressure from China marketplace changes and US store closures, cutting EPS forecasts and lowering its price target to $40. Nike’s recovery is viewed as slower, with growth challenges in a mature market.
UBS downgraded Adidas to Neutral and cut its price target to €173, citing growing gross margin pressures from raw material costs, currency effects and limited expansion potential. While the bank remains positive on long-term growth under CEO Bjørn Gulden, it sees limited earnings upgrades and expects shares to remain range-bound.
Upcoming economic events and earnings to watch
Markets will today focus on ADP employment and the ISM Services PMI for fresh signals on the economy and Federal Reserve policy, while EIA oil inventory data may influence energy prices. Key earnings include Eli Lilly, Novo Nordisk, Disney, Uber, Shopify, Siemens Energy, AppLovin, Western Digital, Sandisk, with Costco reporting monthly sales.
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