Wall Street capped a historic session on Tuesday as the S&P 500 sealed its first record close since August, yet the benchmark's late-session fade left traders questioning the durability of the rally. The index finished at 7,818.93, up 0.58%, but that was 25.59 points below its intraday high of 7,844.52, signaling that buying momentum waned as the closing bell approached.
The Nasdaq Composite extended its winning streak to a second straight record, adding 0.45%, while the Dow Jones Industrial Average climbed 0.49%. The gains came despite a 10-year Treasury yield hovering near 5.28%, a level not seen in over two decades, which typically pressures equity valuations. The market's ability to push higher in such an environment underscores the strength of corporate earnings expectations.
According to FactSet data, analysts project third-quarter S&P 500 earnings per share to surge nearly 30% year-over-year, which would mark the third consecutive quarter of growth above 25%. This earnings optimism is now the primary driver for stocks, as cheap money is no longer a tailwind. With yields at multi-decade highs, companies will need to deliver robust results to justify current valuations.
Breadth at the sector level was largely positive, with ten of eleven S&P 500 sector funds closing higher. Utilities led the charge, jumping 2.95%, followed by consumer discretionary and real estate, which rose 1.20% and 1.09%, respectively. This tilt toward rate-sensitive sectors suggests investors are betting on a potential pause in the Federal Reserve's tightening cycle. However, small-cap stocks lagged, with the iShares Russell 2000 ETF slipping 0.71%, widening the gap between large caps and the broader market.
The bond market showed slight relief, with the 10-year yield easing three basis points from Monday's level. The dollar index fell 0.29%, while gold futures advanced 0.7% to $4,187.10 per ounce. Brent crude settled at $100.58 a barrel, up 0.3%, after dipping to around $97 earlier in the session. Oliver Pursche of Wealthspire noted that stabilizing oil prices helped cap yields, a relationship that held through the close.
In corporate news, Constellation Energy surged 12.25% after announcing a 20-year power purchase agreement with Google to supply 890 megawatts of nuclear capacity. The deal, which supports over $4.3 billion in investment across 11 units, is seen as a major step for the nuclear industry, though execution risks remain. Option Care Health skyrocketed 32.65% after CD&R and McKesson agreed to acquire the company for $32.05 per share in a $5.8 billion deal. Lamb Weston rose 7.52% after beating fiscal first-quarter expectations and raising its EBITDA guidance, despite citing inflationary pressures.
Looking ahead, the Federal Reserve's minutes from its September meeting, due Wednesday at 2 p.m. EDT, will be the next major catalyst. The central bank's next policy decision is scheduled for October 28. If the minutes signal a more hawkish stance, the S&P 500 could struggle to reclaim its intraday high. For now, the market remains in a delicate balance, with earnings season poised to test the resilience of the rally.
