Global equities rise as semiconductors rally, oil hits five-week high
A semiconductor-driven equity rally pushed global indexes higher, while Red Sea tanker disruptions pushed Brent crude above $91 and Treasury yields hit a two-month high on renewed rate hike bets.
Global equities advanced on Tuesday, led by a sharp rebound in semiconductor shares, while oil prices surged to a five-week high on Middle East tensions. The Nasdaq Composite climbed 1.29% to 25,837.21, the S&P 500 gained 0.89% to 7,509.20, and the Dow Jones Industrial Average rose 0.74% to 52,224.64. A broad semiconductor index jumped 5.2%, bouncing off support after dropping more than 20% from its late-June record.
The technology recovery coincides with a critical week for corporate earnings, with Alphabet and Intel set to report. Investors are questioning whether sky-high second-quarter profit expectations for the artificial intelligence sector can be met. "We had a tremendous move up in Q2 in the stock market, and now investors are looking at earnings to see if they justify the move up," said Adam Sarhan, chief executive of 50 Park Investments.
Energy markets reflected an ongoing geopolitical risk premium. Brent futures rose $1.79 to settle at $91.01 a barrel, while U.S. West Texas Intermediate crude gained $1.68 to $84.91. The rally was driven by reports that two oil tankers carrying Saudi crude to Asia reversed course in the Red Sea following threats from Iran-aligned Houthi militants.
"Investors are not necessarily thinking the war is going to end anytime soon," said Bruce Zaro, managing director at Granite Wealth Management. However, he noted that the conflict's impact on oil prices "may be seen as overdone." European markets absorbed the oil shock in stride, with the pan-European STOXX 600 index closing up 0.56%.
In fixed income, the benchmark 10-year U.S. Treasury yield hit 4.640%, a two-month high, before settling at 4.632%. Traders are increasing bets that the Federal Reserve will hike interest rates later this year to combat inflation that remains lodged above their 2% target. Policymakers held rates steady in June but signaled future increases.
The macro environment pushed the dollar higher, with the dollar index rising 0.17% to 101.16. The Japanese yen weakened 0.41% to 163.14 per dollar, a level not seen since 1986, as traders braced for government currency intervention.
The Canadian dollar slipped 0.27% to C$1.411 after U.S. President Donald Trump proposed 50% tariffs on Canadian imports. Canadian Prime Minister Mark Carney stated Trump agreed to intensify negotiations but warned he would consider "all options" if the tariffs proceed. The euro eased 0.11% to $1.1402.
