By Stephen Culp and Tharuniyaa Lakshmi
NEW YORK, Oct 6 (Reuters) - Wall Street rallied on Tuesday as crude prices steadied and US Treasury yields eased, offering some reprieve from concerns that have preoccupied investors in recent weeks, and allowing markets to turn their attention to the approaching third-quarter reporting season.
All three major US stock indexes advanced, with the S&P 500 and the Nasdaq poised to notch all-time closing highs.
The blue-chip Dow remains just over 5% shy of its record
closing level reached on August 5.
When oil prices stabilize or move lower, "that causes yields to move down because there's less anxiety about energy-driven inflation, which in turn is helping lift stocks higher," said Oliver Pursche, senior vice president at Wealthspire Advisors in New York. "This has been the narrative of the market for the last couple of weeks."
Each of the "Magnificent Seven" group of AI-linked megacap firms advanced, bolstering gains, while small-caps lagged their larger-cap counterparts.
The AI trade is very much alive, with the Philadelphia SE Semiconductor Index gaining 1.0%. Expenditures on AI-related infrastructure were reflected in international trade data, which showed imports of capital goods rose by 4.4% in August.
The Commerce Department's report showed the US trade deficit grew by 13.7% as imports rose to a record high. On monthly and annual bases, imports have grown by 4.3% and 28.4%, respectively, reflecting robust domestic demand that could exacerbate inflation pressures, particularly amid war-related supply constraints.
Even so, financial markets are currently pricing in a diminishing probability of 21.6% that the US Federal Reserve will implement its second consecutive rate hike at this month's monetary policy meeting, down from 50.9% a week ago, according to CME's FedWatch tool.
Fed rate hike bets have been responsive to oil prices, which have surged amid the Iran war, threatening to morph into broader price pressures. But supply worries eased after the Group of Seven countries reached an agreement to release emergency diesel and crude stockpiles, sending front-month WTI and Brent crude futures lower.
The Dow Jones Industrial Average rose 258.58 points, or 0.51%, to 51,529.51, the S&P 500 gained 55.02 points, or 0.71%, to 7,828.97 and the Nasdaq Composite gained 176.57 points, or 0.64%, to 27,654.59.
Of the 11 major sectors in the S&P 500, all but healthcare gained ground, with utilities leading the way.
Third-quarter earnings season kicks off next week, with a number of high-profile financial firms expected to report next Tuesday.
Analysts currently expect annual S&P 500 earnings growth of 30.6%, in aggregate, for the July-to-September period, led by an expected 114.7% jump in energy earnings, followed by a 66.5% estimated surge in tech results, according to LSEG.
Marvell Technology climbed 6.5% following the chip designer's 2028 revenue forecast hike due to strong demand for its data center chips.
Chipmaker AMD gained 3.6% after CEO Lisa Su said the company plans to substantially increase chip supply in 2027 to meet booming AI demand.
Constellation Energy jumped 13.4% after Alphabet entered into a 3,590-megawatt power deal with the company.
Option Care Health soared 33.1% after drug distributor McKesson and private equity firm Clayton Dubilier & Rice agreed to buy the infusion therapy provider in a deal worth about $5.8 billion, including debt.
Advancing issues outnumbered decliners by a 2.26-to-1 ratio on the NYSE. There were 212 new highs and 178 new lows on the NYSE.
On the Nasdaq, 2,536 stocks rose and 2,143 fell as advancing issues outnumbered decliners by a 1.18-to-1 ratio.
The S&P 500 posted 23 new 52-week highs and one new low while the Nasdaq Composite recorded 54 new highs and 154 new lows.
(Reporting by Stephen Culp in New York; Additional reporting by Tharuniyaa Lakshmi and Shashwat Chauhan in Bengaluru; Editing by Matthew Lewis)
