Stock Indices Climb as Crude Oil Decline Eases Inflation Concerns

Major stock indices closed higher on Tuesday, buoyed by a decline in crude oil prices that helped alleviate inflation concerns and pushed bond yields lower. The S&P 500 Index rose 0.32%, the Dow Jones Industrial Average gained 0.30%, and the Nasdaq 100 Index advanced 0.64%. In the futures market, E-mini S&P 500 futures increased by 0.30%, while September E-mini Nasdaq futures rose 0.63%.

The upward movement in stock indices was primarily supported by a more than 3% drop in WTI crude oil prices, which eased inflation expectations and drove the 10-year Treasury yield down by approximately 6 basis points to 4.64%. Crude prices fell following reports that the United States plans to return diplomats to Middle Eastern embassies, reducing fears of escalating conflict in the region. Additionally, chipmakers and artificial intelligence infrastructure stocks climbed, lifting the broader market. Short covering in the semiconductor sector emerged ahead of Nvidia’s quarterly earnings release scheduled for after the close on Wednesday.

Despite the overall gains, stocks pulled back from their session highs amid weaker-than-expected U.S. economic data. New home sales dropped 10.5% month-over-month in July to a six-month low of 607,000 units, missing the consensus estimate of 620,000. Consumer confidence also fell short of expectations, with the Conference Board’s index declining 0.8 points to a seven-month low of 89.4 in August, compared to the expected 90.2. The Richmond Fed manufacturing survey for July also surprised to the downside, falling to 4 from an expected rise to 7. Weakness in energy producers and software stocks further limited broader market gains.

In other economic news, the S&P CoreLogic Case-Shiller 20-city home price index for June showed a 2.1% year-over-year increase, beating the 1.8% expectation and marking the largest annual gain in a year. Hawkish commentary from Boston Fed President Susan Collins also weighed on stocks and bonds, as she emphasized that maintaining the current federal funds rate target range requires continued evidence of inflation coming down, and suggested that tightening policy soon would be appropriate if sustained inflation progress does not materialize.

The outlook for strong second-quarter earnings remains a key bullish factor for equities. According to Bloomberg Intelligence, the S&P 500 is on track for earnings growth of nearly 32% in Q2, significantly outpacing the projected 23%. AI spending is expected to drive much of this growth, with AI infrastructure stocks projected to contribute nearly 60% of the S&P 500’s earnings-per-share growth. Thus far, 86% of the 468 S&P 500 companies that have reported Q2 earnings have beaten estimates. Markets are currently pricing in a 39% probability of a 25 basis point rate hike at the next FOMC meeting on September 15-16.

Overseas markets finished higher on Tuesday. The Euro Stoxx 50 gained 0.12%, China’s Shanghai Composite recovered from a 2.5-week low to close up 0.19%, and Japan’s Nikkei 225 rose 0.50% after recovering from a similar low. In the bond market, September 10-year Treasury notes closed up 13 ticks, with the yield falling 5.9 basis points to 4.637%. The rally was supported by the crude oil plunge and carryover support from Monday’s reports regarding the Treasury’s potential use of its General Account balance to fund buybacks of higher-yielding government securities. Gains were further bolstered by the weaker-than-expected home sales and consumer confidence data. Partially offsetting these positive factors were hawkish comments from Fed President Collins and tepid demand at the Treasury’s $69 billion 2-year note auction, which saw a bid-to-cover ratio of 2.60, below the ten-auction average of 2.62.

European government bond yields declined on Tuesday. The 10-year German bund yield fell to a one-week low of 3.195%, finishing down 5.1 basis points at 3.201%, while the 10-year UK gilt yield dropped to a one-week low of 4.981%, finishing down 6.9 basis points at 4.988%. Economic data from Germany showed the August IFO business climate index rising 2.1 points to a one-year high of 88.8, beating expectations of 87.2. Additionally, German Q2 GDP was revised upward to 0.3% quarter-over-quarter and 1.0% year-over-year from the previously reported 0.2% and 0.9%, respectively. Markets are discounting a 95% chance of a 25 basis point ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Semiconductor and AI infrastructure stocks led the broader market higher. Marvell Technology and Advanced Micro Devices both closed up more than 4%, while Seagate Technology Holdings rose more than 3%. Western Digital gained over 2%, and Nvidia, Micron Technology, ARM Holdings, and Lam Research all closed up more than 1%.

Cryptocurrency-related stocks rallied as Bitcoin reached a 3.25-month high. Galaxy Digital Holdings surged more than 8%, while MARA Holdings and Riot Platforms jumped over 6%. Circle Internet Group closed up more than 4%, and Coinbase Global and Strategy rose more than 3%.

Energy producers and service providers retreated amid the drop in crude oil. APA Corp fell more than 3%, while Devon Energy, Diamondback Energy, Halliburton, Phillips 66, Marathon Petroleum, and Occidental Petroleum all dropped more than 2%. Chevron, ConocoPhillips, ExxonMobil, Schlumberger, and Valero Energy closed down more than 1%.

Software stocks declined, limiting upside in the overall market. Thomson Reuters fell more than 3% to lead losers in the Nasdaq 100, and Intuit also dropped more than 3%. Atlassian and Workday fell more than 2%, while Autodesk, Datadog, Palantir Technologies, and Salesforce declined more than 1%.

Moderna led gainers in the S&P 500, soaring more than 14% after Wolfe Research upgraded the stock to peer perform from underperform. Madison Air Solutions rose more than 12% following an announcement of a $2.25 billion private placement of class A common stock. Bread Financial Holdings climbed more than 2% after an upgrade to outperform from peer perform with a $130 price target. Sherwin-Williams gained more than 1% after DA Davidson initiated coverage with a buy recommendation and a $400 price target.

Dick’s Sporting Goods plunged more than 30% after reporting Q2 net sales of $5.59 billion, below the consensus of $5.65 billion, and cutting its 2027 net sales forecast to between $21.9 billion and $22.2 billion from a previous estimate of $22.1 billion to $22.4 billion. The warning pressured other apparel stocks, with Lululemon, Kohl’s, Deckers Outdoors, and Abercrombie & Fitch all closing down more than 3%.

Target fell more than 3% after the company removed a Halloween clown costume following criticism that it evoked blackface imagery, prompting an apology from the company.

Earnings Reports (8/26/2026)

Agilent Technologies, Bath & Body Works, CrowdStrike Holdings, Donaldson, Dycom Industries, Everpure, HP Inc, J M Smucker, Nutanix, Nvidia, Okta, Salesforce, Synopsys, Veeva Systems, and Williams-Sonoma are scheduled to report earnings.

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