Tuesday was a day of two very different stories on Wall Street. On one hand, the AI trade came roaring back with a vengeance, pushing the S&P 500 and Dow to fresh all-time highs. On the other, crude oil took a nosedive, and that combination had investors feeling pretty good about the world.

The spark came from a couple of earnings reports that landed like thunderbolts. Palantir Technologies Inc. (PLTR) absolutely crushed it, and Caterpillar Inc. (CAT) delivered a beat that got everyone talking about the AI trade again. Meanwhile, oil prices tumbled more than 5% on growing conviction that a deal to reopen the Strait of Hormuz is just days away.

Treasury Secretary Scott Bessent told CNBC that “we may have an Iran deal tomorrow to open Hormuz.” That's a big deal for energy markets, and it showed.

So let's break down what happened. The S&P 500 rose 1.4% to 7,707.81, a record. The Dow Jones Industrial Average advanced 870 points, or 1.6%, to 54,048.41, also an all-time high. The Nasdaq 100 outpaced everyone with a 2.5% jump to 29,502.39, and the Russell 2000 climbed 1.5% to 3,027.36.

Oil was the big mover on the downside. West Texas Intermediate crude sank 5.3% to $76.06 a barrel, while Brent slid 5.2% to $79.42. That drop rippled through the rates market, giving traders a reason to dial back their hawkish bets.

The implied probability of a 25-basis-point Federal Reserve rate hike in September dropped to roughly 57% from about 65% a session earlier. A batch of softer domestic data reinforced the move: June job openings fell to 7.36 million against a 7.45 million forecast, factory orders unexpectedly declined 0.3% for a second straight month, and the trade deficit narrowed to $73.3 billion.

The retreat in energy costs flowed straight into bonds. The 10-year Treasury yield eased five basis points to 4.63%, pulling back from Monday's 18-month high of 4.75%. The 2-year fell five basis points to 4.20%, and the 30-year slipped four basis points to 5.19%.

Tuesday's Performance In Major U.S. Indices

Updated by 12:20 PM ET

For those who track the ETFs, the moves were consistent. The iShares Russell 2000 ETF (IWM) advanced 1.5%, the Vanguard S&P 500 ETF (VOO) gained 1.4%, the SPDR Dow Jones Industrial Average ETF Trust (DIA) rose 1.6%, and the Invesco QQQ Trust (QQQ) climbed 2.7%.

Chips Rip While The AI Power Trade Cracks

The Technology Select Sector SPDR Fund (XLK) was the runaway leader, up 4.4%. The Materials Select Sector SPDR Fund (XLB) added 1.4%, and the Industrials Select Sector SPDR Fund (XLI) rose 1.2%. The Financial Select Sector SPDR Fund (XLF) gained 0.9%.

At the other end, the Utilities Select Sector SPDR Fund (XLU) and the Energy Select Sector SPDR Fund (XLE) each fell 0.9%, the only two sectors down for the session.

At the industry level, the VanEck Semiconductor ETF (SMH) surged 4.9%, and the SPDR S&P Metals & Mining ETF (XME) rose 4%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 3.9%. The clear loser was the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), down 1.7%.

The semiconductor complex was carried by an optical and memory melt-up. Micron Technology Inc. (MU) jumped 7.8%, Broadcom Inc. (AVGO) rose 6.2%, Intel Corp. (INTC) added 9.6%, and Marvell Technology Inc. (MRVL) gained 12.2%.

Leading the Russell 1000, Wayfair Inc. (W) exploded 30.4% higher after second-quarter revenue of $3.52 billion beat the $3.47 billion consensus, and adjusted EPS of 95 cents topped the 89-cent estimate. U.S. revenue grew 8.7%, and the company had its strongest domestic growth since 2020. Free cash flow of $301 million was also the best since the COVID-19 pandemic era.

Palantir soared 27.4% after Monday's post-close print showed revenue up 93% to $1.94 billion and U.S. commercial revenue up 149%, alongside the company's largest-ever guidance raise, lifting full-year revenue guidance by roughly $498 million to about $8.15 billion.

Zebra Technologies Corp. (ZBRA) rallied 22% on a strong beat: revenue of $1.56 billion versus $1.50 billion expected, adjusted EPS of $6.35, some 45% above consensus, and third-quarter revenue guidance of $1.56 billion at the midpoint, 4.1% ahead of the Street.

Applied Optoelectronics Inc. (AAOI) extended Monday's move with a 20.1% gain. The company will report on Thursday.

Gartner Inc. (IT) rounded out the top five with a 16.7% jump after adjusted EPS of $4.37 came in 17.1% above consensus on flat revenue of $1.68 billion. Contract value rose 1.7% to $5.3 billion, and management raised full-year adjusted EBITDA, EPS, and free cash flow guidance.

Elsewhere in the earnings tape, W.W. Grainger Inc. (GWW) fell 5.8% even after posting EPS of $12.01 against $11.23 expected, Cummins Inc. (CMI) lost 3.5% on EPS of $6.73 versus $7.26 expected, and TransDigm Group Inc. (TDG) slipped 4% despite EPS of $10.87 topping estimates. Energy producers followed crude lower, with Diamondback Energy Inc. (FANG) down 3.8%.

On the downside, Bruker Corp. (BRKR) plunged 18.1% in a classic mixed print. Adjusted EPS of 49 cents beat by 27.5%, but revenue of $838.5 million missed, and full-year revenue guidance was trimmed to $3.56 billion at the midpoint from $3.59 billion.

Aptiv PLC (APTV) sank 17.8% despite beating on the quarter with adjusted EPS of $1.63 against $1.42 expected. The damage came from guidance: third-quarter EPS of $1.25 to $1.35 landed far below the $1.60 consensus, with revenue guidance of $3.12 billion to $3.22 billion also short of the $3.3 billion estimate.

NRG Energy Inc. (NRG) tumbled 16.4% after adjusted earnings of $1.49 per share fell short of the $1.69 consensus and declined from $1.73 a year earlier, even as GAAP net income hit $506 million and full-year guidance was reaffirmed.

The read-across hit the rest of the AI-power complex: Vistra Corp. (VST) fell 7.3% and Constellation Energy Corp. (CEG) lost 3.0%.

Sterling Infrastructure Inc. (STRL) dropped 11.7% on a margin-mix problem: revenue rose 90% to $1.17 billion and the revenue guidance midpoint was lifted 8.7%, but the adjusted EBITDA midpoint went up only 5.3%.

UL Solutions Inc. (ULS) slid 11.6%. The company's revenue of $816 million was in line and adjusted EPS of 59 cents beat the 56-cent estimate. No guidance cut was disclosed, and the scale of the sell-off is not explained by the numbers themselves, pointing to a de-rating on in-line organic growth rather than a specific catalyst.

Tuesday's Russell 1000 Top Gainers

Tuesday's Russell 1000 Top Losers

So there you have it. A day where the bulls and the oil bears both got what they wanted. The AI trade is back, rates are easing, and the market is hitting records. Just remember, in this market, it pays to keep an eye on both the earnings and the geopolitics.