New York stocks surged across the board on easing tensions in the Middle East and strong earnings from major technology corporations. The Dow Jones Industrial Average topped 53,000 for the first time ever, hitting a fresh record high.
On the 1st (local time) at the New York Stock Exchange, the Dow Jones Industrial Average rose 693.38 points (1.32%) from the prior session to finish at 53,178.41. The Standard & Poor's (S&P) 500, made up of 500 large corporations, gained 110.79 points (1.48%) to 7,600.51. The tech-heavy Nasdaq also jumped 540.04 points (2.13%) to close at 25,913.90. The Russell 2000, which tracks U.S. small and mid-cap stocks, added 54.15 points (1.85%) to end at 2,985.49. The volatility index (VIX), a gauge of market swings, fell 1.88% to 15.69, signaling stability.
That day, President Donald Trump said he canceled plans for a military strike on Iran and would resume talks, easing fears of a crisis emanating from the Middle East. With the Iran war dragging on and the United States holding off on further strikes, investors were relieved.
Trump emphasized that he is setting as a first-stage goal the full opening of the Strait of Hormuz, a key maritime logistics chokepoint. He added that while Iran's leadership publicly denies negotiations, it is highly duplicitous and privately wants talks, saying "the U.S. Navy is effectively blockading and controlling the Strait of Hormuz."
As war fears receded, international oil prices fell immediately. West Texas Intermediate (WTI) September futures, the U.S. benchmark, dropped more than 7% to $78.59 per barrel. Brent October futures, the global benchmark, also fell more than 5% to $83.46.
U.S. large energy corporations' shares struggled on the back of lower oil prices. Exxon Mobil and Chevron fell together. Trump expressed frustration, saying these corporations "reaped excessive profits by exploiting supply shortages triggered by the Iran war."
Technology stocks, which had faltered amid debate over an artificial intelligence investment bubble last month, lifted the indexes as they rolled out results that met expectations one after another. Although tech funds plunged nearly 8% last month, stoking anxiety, sentiment flipped completely on Aug. 1, the first trading day of August.
Amazon, the world's largest e-commerce corporation, posted results that beat expectations, sending its shares up nearly 5%. At the close, Amazon's market capitalization topped $3 trillion for the first time. Meta jumped nearly 6%, and Alphabet and Microsoft each rose around 5%. Nvidia, the leader in AI chips, climbed 3%. Among the "Magnificent 7" big tech corporations, only Apple slipped 0.8%.
Experts said corporations' solid fundamentals revived risk appetite. According to Bank of America securities, 77% of S&P 500 corporations that have released second-quarter results so far beat market expectations. That is the highest beat rate since 2021.
Jed Ellerbroek, portfolio manager at Argent Capital Management, said the market judges that the massive capital expenditure undertaken by technology corporations will translate into attractive investment revenue. Capital expenditure refers to the expense corporations invest in data centers, equipment, and research and development to generate future profits. He noted, "Demand for accelerated computing still far exceeds supply, and cloud computing corporations hold the high ground."
John Stoltzfus, chief investment strategist at Oppenheimer, said recent declines lowered the S&P 500 forward price-earnings ratio (PER), making stocks relatively cheaper. In other words, with prices lower relative to corporations' earnings, it has become a good time for investors to see a buying opportunity.
Still, caution over the Middle East remains. Adam Crisafulli, founder of Vital Knowledge, said investors are holding back from euphoria, noting "there is a long way to go before the conflict is fully resolved." Chris Larkin at E*TRADE said, "Given the instability in U.S.-Iran diplomacy, corporate earnings and jobs data due this week will determine the market's direction."
A recovery in U.S. manufacturing also helped stocks. The Institute for Supply Management (ISM) released its July manufacturing Purchasing Managers' Index (PMI) at 55.6. That was well above the 54.0 expected by the market and the fastest pace of expansion since May 2022. PMI is an indicator that gauges business conditions by surveying corporations' purchasing managers on new orders, production, and employment. A reading above 50 signals expansion. New export orders and production rose sharply, and employment entered an expansion phase for the first time in 33 months, boosting hopes for a soft landing.
Among individual names, Boeing jumped 7%, drawing attention. The 737 Max 7 passenger jet built by Boeing received flight approval from the Federal Aviation Administration (FAA). With certification long delayed by a series of past crashes and manufacturing quality issues now completed, corporate uncertainty eased significantly.
By contrast, shares of British drugmaker AstraZeneca plunged more than 7% after reports that it is discussing a $400 billion merger with U.S. rival Bristol Myers Squibb. Conversely, shares of the acquisition target Bristol Myers Squibb rose more than 5%.
In the bond market, Treasury yields fell. As easing Middle East tensions reduced inflation fears, the 10-year U.S. Treasury yield declined 6 basis points (0.06 percentage point) to around 4.68%. Typically, when Treasury yields fall, corporations' funding expense decreases, which is a positive for stocks.