What to Know

  • The 10-year Treasury yield gave back about 5 basis points after Monday’s move to its highest level since 2002.
  • The 10-year yield remained near 5.30%, while the 30-year yield stayed close to its recent multi-year high.
  • The Nasdaq and S&P 500 reached records, and the Dow participated more strongly as rate-sensitive shares found support.
  • Brent traded near $99 a barrel and WTI near $88 as Middle East exports held up and a G7 emergency stockpile release eased immediate supply concerns.
  • Nvidia rose 1.1% and moved closer to a $6 trillion market value, while Meta, Tesla, Amazon and Microsoft also advanced.
  • Constellation Energy led the S&P 500 with a 13.9% gain after Google entered a 3,590-megawatt power deal with the company.
  • Option Care Health surged 32.7% after McKesson and Clayton Dubilier & Rice agreed to buy the company in a transaction valued at about $5.8 billion, including debt.
  • Advancers beat decliners by close to three-to-one on the New York Stock Exchange and by less than two-to-one on the Nasdaq.
  • The Nasdaq still recorded well over twice as many new 52-week lows as new highs despite the index trading at a record.
  • Analysts are looking for S&P 500 earnings growth of more than 30% from a year ago as third-quarter earnings season approaches.

Records Extend as Bond Pressure Eases

U.S. equities pushed further into record territory as a short-term retreat in Treasury yields helped unlock broader participation across the stock market. The S&P 500 and Nasdaq reached new highs, while the Dow showed stronger involvement after previously lagging the momentum concentrated in technology and artificial intelligence-linked shares.

The main shift came from the bond market. The 10-year Treasury yield gave back about 5 basis points after Monday’s advance to its highest level since 2002. That move did not remove the broader rates challenge for equities, but it gave traders enough relief to rotate into areas that had been pressured by the rapid rise in long-term borrowing costs.

Even with the pullback, yields remain a central risk. The 10-year Treasury yield is still near 5.30%, and the 30-year yield remains close to its recent multi-year high. That means equity investors are not operating in a low-rate environment. Instead, the latest rally reflects a temporary easing of pressure as bond sellers stepped back and buyers absorbed supply for the session.

Oil Adds to the Relief Trade

Energy prices also contributed to the improved tone. Brent traded near $99 a barrel, while WTI traded near $88. Middle East exports continued to hold up, and the G7 emergency stockpile release helped reduce immediate concern around supply disruption.

For equity traders, the combination of lower yields and cheaper crude mattered because both forces can reduce pressure on inflation expectations. When oil prices rise sharply, investors often worry that consumer and business costs will climb, complicating the path for monetary policy. When long-term yields rise at the same time, valuation pressure increases, especially for growth stocks whose earnings are expected further in the future.

Tuesday’s setup offered the opposite mix. Oil softened, yields eased and risk appetite improved. That helped the rally spread beyond the largest technology names, even though leadership from artificial intelligence and megacap growth remained a defining feature of the market.

Megacap Technology Still Leads, But the Rally Broadens

Artificial intelligence-linked shares continued to anchor the advance. Nvidia added 1.1% and moved closer to a $6 trillion market value. Meta, Tesla, Amazon and Microsoft also traded higher, reinforcing the view that the Nasdaq’s record-setting run remains deeply tied to the largest technology and platform companies.

These stocks have continued to attract capital even as yields remain elevated. That resilience reflects the market’s confidence in companies connected to AI infrastructure, cloud computing, semiconductors, advertising platforms and data-center demand. However, the rally was not limited to familiar megacap names.

Constellation Energy was the strongest performer in the S&P 500, climbing 13.9% after Google entered a 3,590-megawatt power deal with the company. The move highlighted a growing theme in the equity market: traders looking for exposure to data-center expansion without only buying chipmakers. Power demand has become a major part of the AI investment story, and utilities or energy providers tied to large-scale electricity contracts are increasingly being treated as part of that ecosystem.

Deal activity also supported sentiment. Option Care Health surged 32.7% after McKesson and Clayton Dubilier & Rice agreed to buy the company in a transaction valued at about $5.8 billion, including debt. The takeover followed Monday’s cash offer for PTC, keeping merger-and-acquisition activity in focus and offering another reason for traders to look beyond index-level gains.

Breadth Improves, Yet Internal Signals Stay Mixed

Market breadth improved from Monday, but the internal picture was not entirely clean. Advancers beat decliners by close to three-to-one on the New York Stock Exchange and by less than two-to-one on the Nasdaq. That was enough to show that participation expanded, particularly as lower yields gave rate-sensitive shares breathing room.

Still, the Nasdaq’s internal data remained uneven. The index logged well over twice as many new 52-week lows as new highs even while sitting at a record. That divergence suggests the headline strength remains dependent on a relatively concentrated group of winners. In a healthy rally, traders often prefer to see more stocks making new highs and fewer names breaking down to new lows.

The mixed breadth picture does not invalidate the record highs, but it does add caution. A market can continue rising with narrow leadership, especially when the largest stocks carry heavy index weight. However, if those leaders stumble, weak breadth can make the broader index more vulnerable to sharper pullbacks.

Earnings Season Becomes the Next Major Test

Third-quarter earnings season starts next week, and expectations are already demanding. Analysts are looking for S&P 500 earnings growth of more than 30% from a year ago, with much of that improvement expected from AI-related companies.

That creates a high bar for the next stage of the rally. Traders have already paid elevated prices for Nvidia, hyperscalers, chip designers and power names linked to data-center growth. With long-term yields still high, there may be limited room for disappointment if earnings or guidance fail to validate current valuations.

The earnings test is especially important because lower yields and softer oil provided Tuesday’s immediate fuel, but those catalysts may not be enough on their own. To sustain fresh records, investors will likely want confirmation that corporate profits are expanding fast enough to justify higher equity prices in a high-rate environment.

S&P 500 Futures Hold a Bullish Technical Position

December E-mini S&P 500 Index futures were in a strong position at mid-session on Tuesday. The main trend was up according to the daily swing chart. A trade through the August 13 main top at 7,904.00 would reaffirm the uptrend, while a move through the two-day bottom at 7,672.75 would change the main trend to down.

The 50-day moving average at 7,751.19 also continued to support the uptrend. Technical traders often view a rising market above its 50-day moving average as a sign that momentum remains intact. In this case, the level sits between the upside reference at 7,904.00 and the downside trend-change point at 7,672.75, giving chart watchers a clear framework for near-term risk.

December E-mini Nasdaq-100 futures also remained firm, running to another record Tuesday and marking six straight higher sessions from 30,356.75. The contract stayed above the June record at 31,336.75, reinforcing the bullish bias created by the new high, the uptrend on the main swing chart and the market’s position above the 50-day moving average.

Fed Signals and Bond Market Stability Remain Key

Several Federal Reserve speakers on Tuesday and Wednesday’s September meeting minutes are next in focus for traders watching the bond market. The latest stock rally leaned heavily on a pause in yields and a calmer oil backdrop, so any renewed pressure in long-term rates could quickly test equity momentum.

The central question is whether the long end of the Treasury curve can remain quiet long enough for earnings to take over as the primary driver. If yields stabilize, investors may stay willing to reward companies delivering strong profit growth and credible guidance. If yields climb again, especially from already elevated levels, valuation pressure could return quickly.

For now, the market has delivered another record-setting session, but the foundation remains conditional. The S&P 500 and Nasdaq are benefiting from AI leadership, improving breadth and temporary relief in yields and oil. The next leg likely depends on whether earnings can meet a high bar while the bond market avoids another disruptive selloff.

Frequently Asked Questions (FAQs)

Why did the S&P 500 and Nasdaq hit records?

The S&P 500 and Nasdaq reached records as Treasury yields eased, oil prices softened and megacap technology shares continued to advance. The combination helped improve risk appetite and broadened participation across parts of the market.

How much did the 10-year Treasury yield fall?

The 10-year Treasury yield gave back about 5 basis points after Monday’s move to its highest level since 2002. Even after the retreat, the yield remained near 5.30%.

Why do lower yields help stocks?

Lower yields can reduce pressure on equity valuations, especially for growth stocks that rely on expectations for future earnings. When borrowing costs ease, traders may become more willing to pay higher prices for companies with strong growth prospects.

What role did oil prices play in the rally?

Oil prices helped by easing inflation concerns. Brent traded near $99 a barrel and WTI near $88 as Middle East exports held up and a G7 emergency stockpile release reduced immediate supply worries.

Which stocks stood out in the S&P 500?

Constellation Energy led the S&P 500 with a 13.9% gain after Google entered a 3,590-megawatt power deal with the company. Nvidia also rose 1.1% and moved closer to a $6 trillion market value.

Was the rally broad-based?

Breadth improved, with advancers beating decliners by close to three-to-one on the New York Stock Exchange and by less than two-to-one on the Nasdaq. However, the Nasdaq still recorded well over twice as many new 52-week lows as new highs, showing that internal strength remained uneven.

What is the key technical level for S&P 500 futures?

For December E-mini S&P 500 Index futures, a move through the August 13 main top at 7,904.00 would reaffirm the uptrend. A move through the two-day bottom at 7,672.75 would change the main trend to down.

Why is earnings season important now?

Earnings season is important because expectations are high. Analysts are looking for S&P 500 earnings growth of more than 30% from a year ago, with much of the growth expected from AI-related companies.

What should traders watch next?

Traders are watching Federal Reserve speakers, Wednesday’s September meeting minutes, Treasury yields, oil prices and the start of third-quarter earnings season. The rally’s next phase may depend on whether earnings can support valuations while long-term rates remain contained.