S&P 500 closes at its first record since August as bond yields ease

The S&P 500 closed at a record on Tuesday for the first time since mid-August, as a pause in the long slide in Treasury bonds gave investors room to keep buying ahead of third-quarter earnings season.

The index rose 44.98 points, or 0.58%, to 7,818.93, according to closing market data, above its previous closing high of 7,798.99 set on Aug. 13 in S&P Dow Jones Indices figures published by the Federal Reserve Bank of St. Louis. It was the fourth straight gain for the benchmark, which is up about 14% this year. The S&P 500 traded as high as 7,844.52 before giving back 25.59 points in the final stretch of the session.

The Nasdaq Composite rose 0.45% to 27,599.79, according to Nasdaq, topping the record it set on Monday. The Dow Jones Industrial Average gained 0.49% to 51,521.28 but remains about 5% below its record close of 54,349.12 from Aug. 5.

Bond yields back off

The 10-year Treasury yield fell to 5.27% from 5.31% on Monday, according to Treasury Department data. Monday's reading was the highest for the 10-year since 2002. Higher yields raise borrowing costs across the economy and make bonds more competitive with stocks, so even a small pullback matters for share prices at record levels.

Oil was part of the reason. Brent crude fell as much as 3.3% early in the day after Group of Seven countries agreed to release emergency stockpiles of crude and diesel, before settling 0.2% higher at $100.58 a barrel. U.S. crude ended a cent higher at $89.44.

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 the afternoon, traders saw a 21.6% chance that the Federal Reserve would raise interest rates at its meeting this month, down from 50.9% a week earlier, according to CME Group's FedWatch tool.

A rally led by big companies

The gains were concentrated in the largest stocks. The Russell 2000 index of smaller companies fell 0.59% to 2,830.30. Among S&P 500 sectors, consumer discretionary rose 1.39% and real estate 1.13%, while health care slipped 0.16% and was the only major sector lower in afternoon trading. Nvidia edged up 0.14% to $239.24, leaving the chipmaker's market value at about $5.77 trillion as it closes in on $6 trillion. The Cboe Volatility Index, a gauge of expected swings in the S&P 500, fell 3.29% to 15.01.

Hard-drive makers fall again

The sharpest losses were among makers of hard drives used in data centers. Seagate Technology fell 9.18% to $805.63 and Western Digital dropped 6.93% to $411.04, as investors weighed more competition from Toshiba, the third major maker of the drives.

Toshiba said on Oct. 2 that its Philippine manufacturing unit had shipped its first products from an expanded line for high-capacity data center drives and aims to nearly double annual production capacity by fiscal 2027 compared with fiscal 2025, measured by storage capacity. Nikkei Asia reported that Toshiba plans to spend about 60 billion yen, roughly $380 million, on the expansion and wants to lift its market share to 30% over the medium term from just over 10%. Adding to the pressure, a report on Tuesday said Toshiba and Seagate are competing to buy the magnetic-heads business of TDK, the only independent maker of the recording heads that go inside the drives.

Memory chip makers fell less. Micron Technology lost 1.73% and SanDisk 2.56%.

Earnings season is next

Investors now turn to third-quarter results, which begin in earnest next week when the biggest U.S. banks report. Analysts expect S&P 500 earnings to rise 30.6% from a year earlier, led by a 114.7% jump for energy companies and a 66.5% increase for technology, according to LSEG data. Goldman Sachs analysts said last week that AI infrastructure stocks are expected to drive more than half of the index's earnings growth this quarter.