Dow jumps 1,041 points as Iran deal hopes lift S&P 500

The S&P 500 rose 1.8% to a record 7,736.85 as Treasury Secretary Scott Bessent said an Iran deal was close, sending oil prices sliding and lifting AI-linked stocks.

"We are in talks with the Iranians. There is a chance we may have a deal today or tomorrow to open the strait and move towards a more normalized position in this conflict," Bessent told CNBC's "Squawk Box" Tuesday morning.

The Dow Jones Industrial Average surged 1,041 points, or 2%, by about 1:20 p.m. ET while the Nasdaq composite jumped 2.4%. Brent crude fell 5.3% to $79.30 a barrel and West Texas Intermediate dipped 5.4% to $76.04. Palantir Technologies rallied 29.3% after reporting revenue of $1.94 billion, up 93% from a year earlier, and raising its full-year forecast.

The rally extends a blowout earnings season in which more than 84% of S&P 500 companies have beaten expectations, according to FactSet. With the 10-year Treasury yield easing to 4.63%, investors are watching whether a confirmed Iran deal pushes oil lower and extends the equity advance into the second half.

Iran Deal Hopes Weigh on Oil

Bessent said any agreement would restore "freedom of movement" through the Strait of Hormuz, a route carrying about 20% of the world's oil supplies. Brent crude fell 5.3% to $79.30 a barrel while West Texas Intermediate dipped 5.4% to $76.04, extending Monday's slide after President Donald Trump called off an attack on Iran and said peace talks would resume. Bessent predicted prices could fall further as hundreds of ships stuck in the Persian Gulf begin moving.

"It's not just energy. It's fertilizer, it's refined products, it is the various industrial gasses," Bessent said. "We could see a big relief trade as those prices go down."

The drop in oil eased Wall Street's inflation worries, pulling the 10-year Treasury yield down to 4.63% from 4.70% Monday and 4.75% at the end of last week. Lower yields reduce borrowing costs for homebuyers and companies building AI data centers.

Palantir's 'Otherworldly' Quarter Lifts AI Names

Palantir Technologies rallied 29.3% after CEO Alex Karp called the quarter "otherworldly." Revenue jumped 93% to $1.94 billion, beating the $1.81 billion consensus, with U.S. commercial revenue up 149% to $764 million and total contract value up 153% to a record $2.1 billion. The company raised its full-year revenue forecast to $8.15 billion.

Deutsche Bank's Brad Zelnick upgraded Palantir to Buy from Hold with a $200 price target, while Jefferies' Brent Thill kept an Underperform rating and raised his target to $80 from $70, warning that "the setup gets harder from here" as comparisons stiffen into 2027.

Technology led the advance as AI-linked names climbed on strong earnings. Marvell Technology rose 14.4%, Micron gained 7.9%, Nvidia added 2.3% and Microsoft rose 1.6%. Caterpillar climbed 6.5% after posting its first quarter with more than $20 billion in sales and revenue, helped by demand for turbines used to power data centers.

The rally extends an earnings season in which more than 84% of S&P 500 companies have beaten expectations, according to FactSet, with spring earnings per share on track to grow nearly 50% from a year earlier — the biggest jump since 2021. McDonald's added 0.9% after topping profit estimates.

Investors were awaiting SpaceX's first quarterly earnings, scheduled for Tuesday evening, with options traders bracing for a swing of $225 billion in the value of SpaceX shares. SpaceX shares rose 6.6% Tuesday.

This article is for informational purposes only and does not constitute investment advice.