Business
Markets Hit Fresh Records as Earnings Outshine Geopolitical Uncertainty
Equity Momentum
By Rhea Lobo
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Market Valuation
Sector Disconnect
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The S&P 500 closed at a record high on Tuesday, its first record close in two months, in a session that added to a $3.7T rally already underway.
Two forces drove the session. First, corporate earnings came in well above expectations, with more than 84% of S&P 500 companies beating forecasts.
Second, oil prices dropped sharply after Treasury Secretary Scott Bessent said the US was in talks with Iran and that a deal to reopen the Strait of Hormuz could come within days.
Palantir Technologies led the charge, surging 29% after posting what its CEO called "otherworldly" second-quarter results driven by AI sovereignty demand.
The broader earnings picture reinforced the rally. With more than 75% of S&P 500 companies having reported, second-quarter earnings are on track to climb 31.1% on an adjusted basis from a year ago, the highest growth since 2021. Tech sector earnings are on pace to rise 72%.
Stronger profits have also moderated valuations. The S&P 500's forward price-to-earnings ratio stood at 20.4, down from 22.2 at the end of 2025 and below the 21.3 reading on June 2, the index's previous record high.
"Earnings remain our north star, the economy continues to show resilience, market participation has broadened, and valuation excesses have largely been worked off."
Keith Lerner, Truist Advisory Services
Not everyone is celebrating. Michael Burry, the investor known for predicting the 2008 housing crash, warned on X that new highs could precede a 1987-style collapse.
He pointed out that the S&P 500 climbing 5% over four trading days to a new high has happened only three other times in 30 years, including near the peak of the dot-com bubble in March 2000.
Burry is maintaining put options on the iShares Semiconductor ETF and has rolled his Nvidia bearish puts into June 2027.
The day after the record close, markets paused as investors waited for follow-through on Iran negotiations ahead of the monthly jobs report on Friday.
Rising Treasury yields remain a key risk. The 10-year yield recently hit its highest level since January 2025 before easing to 4.63% as oil prices fell. If yields climb again, they could compete with equities for investment dollars and raise borrowing costs across the economy.
The market's next test is sustaining the breakout, with Iran talks still unresolved and a seasonally difficult stretch ahead.
