By Stephen Culp and Tharuniyaa Lakshmi
NEW YORK, Oct 6 (Reuters) - US stocks ended higher 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.
The broad rally pushed the S&P 500 and the Nasdaq to all-time closing highs.
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."
The AI trade is very much alive, with the Philadelphia SE Semiconductor Index gaining ground. 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 that the US Federal Reserve will implement its second consecutive rate hike at this month's monetary policy meeting, 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, helping to stabilize front-month WTI and Brent crude futures.
"We don't expect (the Fed) to do anything at the next meeting," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. "But I think they're in a gradual hiking cycle."
"High oil prices have hit a broad range of consumers," Ghriskey added. "That's one of the reasons for the recent Fed hike."
According to preliminary data, the S&P 500 gained 46.52 points, or 0.60%, to end at 7,820.47 points, while the Nasdaq Composite gained 127.43 points, or 0.46%, to 27,604.74. The Dow Jones Industrial Average rose 263.67 points, or 0.49%, to 51,531.57.
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 following the chip designer's 2028 revenue forecast hike due to strong demand for its data center chips.
Chipmaker AMD gained after CEO Lisa Su said the company plans to substantially increase chip supply in 2027 to meet booming AI demand.
Constellation Energy jumped after Alphabet entered into a 3,590-megawatt power deal with the company.
Option Care Health soared 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.
(Reporting by Stephen Culp in New York; Additional reporting by Tharuniyaa Lakshmi and Shashwat Chauhan in Bengaluru; Editing by Matthew Lewis)
