Stocks on Wall Street closed mixed on Tuesday, with the Dow Jones Industrial Average surging while the Nasdaq Composite edged lower, as a batch of upbeat corporate earnings and a pullback in oil prices helped steady investor sentiment.
The blue-chip Dow rose 529.85 points, or 1.02%, to close at 52,495.88. The S&P 500 added 0.29% to finish at 7,712.57, while the Nasdaq Composite slipped 0.02% to end at 26,424.82.
3M shares jumped more than 5% after the industrial and safety products maker reported better-than-expected results and raised its full-year guidance, giving the Dow a significant lift. Aerospace and defense company Northrop Grumman climbed more than 4% after its earnings topped estimates.
Meanwhile, oil prices retreated from an earlier rally, helping to improve the mood. U.S. West Texas Intermediate crude futures fell 1.8% to settle at $101.79 per barrel, while Brent crude futures dropped 0.7% to $108.79 per barrel. The move in oil also pushed Treasury yields lower as traders continued to monitor developments in the Middle East.
Markets have recently been weighed down by concerns over the sustainability of the artificial intelligence trade amid worries about debt and demand. In fact, tech sentiment took a hit earlier in the day after South Korean AI company Elice plunged more than 30% overnight on its public market debut.
Asia-Pacific markets fell on Tuesday following the prior session's gains on Wall Street, dragging South Korean shares lower. However, some AI-related names recovered as the trading session progressed. Western Digital rose more than 3%, while Seagate Technology gained over 2%. CoreWeave and Marvell Technology each advanced more than 1%.
The S&P 500 closed higher on Monday, and the Nasdaq Composite rose more than 1%. That marked a rebound from last week's sharp sell-off, when fears intensified that companies were borrowing too heavily to build out AI infrastructure.
"For most of this year, the market has been willing to look past higher rates because the growth story — especially around AI — was strong enough to justify it. Last week, we saw that relationship start to get tested," said Jake Behan, head of capital markets at Direxion. "Hyperscalers will report earnings in the coming weeks, and that will set up the next big stress test for the AI trade," he continued. "Guidance around return on investment, data center spending and 2027 capital expenditures will arguably matter more than headline earnings figures."
South Korean AI firm Elice plummeted more than 30% overnight on its first day of trading, dealing a blow to tech sentiment. Investors have been increasingly worried about whether the AI rally can be sustained as concerns over debt and demand mount. This comes after last week's rout, when fears that companies were taking on massive debt to fund AI computing infrastructure sent selling pressure rippling across the broader market.
"On Friday, ahead of the intensifying sell-off, the cost of volatility hedges spiked intraday; now, with confidence in the tech sector's outlook restored, traders are unwinding those hedges and Wall Street is finally breathing a sigh of relief," wrote Jose Torres, senior economist at Interactive Brokers.
CoreWeave tumbled more than 25% last week. After Goldman Sachs upgraded the stock to buy, the shares briefly attempted to recover some ground, but early gains faded quickly and the stock ended slightly lower.
Asia-Pacific markets declined on Tuesday despite the prior overnight gains on Wall Street. South Korea's Kospi fell 3.73%, Japan's Nikkei 225 dropped 1.3%, and Australia's S&P/ASX 200 shed 0.33% to close at 8,816.9.