Wall Street closed sharply higher Tuesday, with all three major indexes rallying on hopes that the Strait of Hormuz will reopen and on a run of strong corporate earnings.

The S&P 500 jumped 1.79% to 7,736.52, the Nasdaq Composite gained 2.59% to finish at 26,584.99, and the Dow Jones Industrial Average added 907.47 points, or 1.71%, to close at 54,085.88. It was the S&P’s first record close in two months, surpassing the peak set in early June, and the first time the Dow has ever closed above 54,000 — back-to-back all-time highs after Monday’s record, which was itself the blue-chip index’s first in a month.

The move extends a violent reversal in technology. The Nasdaq has climbed nearly 9% since its July 29 low, recovering from a stretch in which chipmakers sold off hard and investors turned selective on the rest of the tech complex.

What Moved It

Two catalysts, running in the same direction.

The first was the Middle East. Treasury Secretary Scott Bessent told CNBC there was a chance of a deal to open the strait as soon as today or tomorrow, and crude gave up its earlier gains, with Brent dropping more than 4% to trade below $80 a barrel. Bond prices rose alongside equities as oil sank.

That followed the weekend reversal in Washington. West Texas Intermediate fell about 5% Monday to settle at $80.34 and Brent lost 4.7% to $83.77 after the President said he had called off a planned strike on Iran at the request of Tehran and other regional governments.

The second was earnings, and they were the more durable of the two. Palantir surged 29.45% after the AI software company posted blockbuster quarterly results and raised its full-year outlook. Wayfair climbed nearly 19% on a second-quarter beat. The Russell 2000 advanced, and the rally was broad rather than confined to megacap tech.

The Oil Signal Is Not Clean

Traders should be careful reading Tuesday’s crude move as a directional call. Oil actually climbed toward $81 earlier in the session, recovering part of Monday’s sharp losses, as uncertainty persisted over the US-Iran track — with Iran denying any direct talks are underway while saying discussions with Oman on increasing shipping through the strait are progressing.

Brent gained roughly 24% in July, its strongest month since March, driven by renewed US-Iran conflict, Houthi attacks in the Red Sea and threats to key shipping routes. A single Cabinet-official soundbite has now clipped a meaningful piece of that. It has not moved a single additional barrel through the waterway.

The physical picture remains unresolved. An Indian-flagged vessel sank in the Red Sea off Yemen today after an attack that Yemeni government-aligned forces blamed on the Houthis. Equity markets did not price it.

After The Bell

SpaceX reported its first quarterly results as a public company after Tuesday’s close, with Advanced Micro Devices also due. Caterpillar, Merck and McDonald’s were among the other names on the calendar.

SpaceX remains the most contested name on the tape. Shares traded more than 17% below their opening price as of Tuesday afternoon and nearly 50% off the intraday peak set in mid-June. Short sellers held 32.2% of the publicly tradable float heading into the print, according to S3. Retail investors, meanwhile, have been net buyers every single trading day since the June IPO, according to VandaTrack, which wrote that conviction in the name remains unusually persistent. A key insider lockup expires Thursday.

The Rate Backdrop

The rally is running into a less accommodating Fed. Investors are navigating the start of Kevin Warsh’s tenure as Federal Reserve chairman at a moment when stubborn inflation has pushed markets toward betting the Fed holds rates steady in coming months — or hikes them. Treasury yields slipped from 52-week highs Monday but edged back up Tuesday morning.

That is the tension underneath two consecutive record closes. Falling crude is the single cleanest disinflationary input available right now, which is precisely why equities are trading Hormuz headlines so aggressively. If the strait stays shut and oil retraces its July gains, the inflation math that Warsh inherited gets harder, not easier — and the earnings strength that carried Tuesday’s session will be asked to do considerably more work.

JBizNews Desk | Wall Street

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