Stock indexes register records after upbeat company forecasts; oil drops

NEW YORK/MILAN — Major stock indexes hit record highs on Tuesday (Aug 4) following upbeat forecasts from Caterpillar and other companies, and oil prices extended recent sharp declines.

The Dow, S&P 500 and pan-European STOXX 600 all reached records.

The Japanese yen weakened, but held on to most of its intervention-driven gains after last week's joint action by Tokyo and Washington to support the currency.

Weighing on oil were comments by Qatari and US officials that raised hopes for a diplomatic resolution to the Iran war that could improve oil flows through the Strait of Hormuz.

US Secretary of State Marco Rubio said on Tuesday there was progress in talks with Iran and Oman about moving more ships through the strait, but a final agreement had yet to be reached. 

Treasury Secretary Scott Bessent earlier said that a deal with Iran to reopen the strait could come as soon as Tuesday or Wednesday.

Brent crude futures fell US$4.41 (S$5.65), or 5.3 per cent, to settle at US$79.36 a barrel, the lowest since July 13. US West Texas Intermediate futures dropped US$4.57, or 5.7 per cent, to settle at US$75.77 a barrel, also a three-week low.

Shares of Caterpillar, often seen as a bellwether for the global industrial economy, rose after the company increased its annual revenue growth forecast as it benefited from a buildout of AI data centres, while shares of Palantir Technologies surged as the company also raised its annual revenue forecast.

Investors are reacting to "stronger earnings and stronger expectations", said Oliver Pursche, senior vice president and adviser for Wealthspire Advisors in Westport, Connecticut. "There's a general sense of optimism out there and that's being reflected."

More than 80 per cent of S&P 500 companies are beating analysts' earnings expectations for the last quarter, according to LSEG data.

The Dow Jones Industrial Average rose 907.47 points, or 1.71 per cent, to 54,085.88, and the S&P 500 gained 136.02 points, or 1.79 per cent, to 7,736.52, each setting all-time closing highs. The Nasdaq Composite rose 671.10 points, or 2.59 per cent, to 26,584.99.

After the closing bell, shares of SpaceX were about seven per cent lower. The company posted its first quarterly results as a public company, highlighting a 92 per cent rise in revenue on strong growth in its Starlink satellite-internet and AI businesses.

MSCI's gauge of stocks across the globe rose 14.68 points, or 1.30 per cent, to 1,145.69. It hit an intraday record high and was set to close at a record.

The pan-European STOXX 600 index rose 0.73 per cent to 656.86, a record high close. It was lifted by gains in technology stocks and a slate of corporate earnings updates.

Yen eases after intervention-driven rally

The yen was down 0.38 per cent at 157.79 per dollar in afternoon trading following coordinated intervention by US and Japanese authorities to prop up the yen last week.

The Japanese currency remains stronger against the greenback compared with levels a week ago that prompted official support and marked the first US intervention in the Japanese foreign exchange market in 15 years.

The dollar index eased 0.13 per cent at 99.88.

Interest rate sensitive two-year US Treasury yields fell to a two-week low as oil prices tumbled, and traders repriced for lower odds of a Federal Reserve interest rate hike in September.

Most analysts believe Fed Chair Kevin Warsh does not want to hike rates, and the incoming data could provide him enough cover to stay put.

The two-year note yield, which typically moves in step with Fed interest rate expectations, fell 6.22 basis points to 4.194 per cent and reached 4.1897 per cent, the lowest level since July 20.

The yield on benchmark US 10-year notes fell 5.72 basis points to 4.627 per cent.

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