Dow jumps over 540 points as earnings, lower oil offset chip selloff

The Dow Jones Industrial Average led Wall Street higher on Tuesday as strong corporate earnings, lower oil prices and a continued rotation away from semiconductor stocks supported broader market gains.

Investors also looked ahead to key earnings from major technology companies and the Federal Reserve's interest rate decision later this week.

The Dow gained 546.61 points, or 1.05%, to close at 52,756.69.

The S&P 500 rose 0.23% to 7,430.25, while the Nasdaq Composite slipped 0.24% to 24,873.20 as weakness in semiconductor stocks weighed on the technology-heavy index.

Sherwin-Williams surged 8% after reporting better-than-expected second-quarter results, while Coca-Cola climbed nearly 5% after beating earnings and revenue expectations and raising its full-year outlook.

Boeing also advanced after reporting positive free cash flow, contributing to the Dow's gains.

Investors continued rotating into healthcare, consumer staples and financial stocks, while technology remained under pressure.

The S&P 500 healthcare and consumer staples sectors both advanced, while financial stocks also posted gains.

Chip stocks remain under pressure ahead of Big Tech earnings

Semiconductor stocks extended their recent decline as investors continued reassessing artificial intelligence-related spending and growing competition within the industry.

The VanEck Semiconductor ETF (SMH) fell more than 3%, marking its fourth consecutive losing session.

Micron Technology dropped about 10%, while AMD lost around 8%.

The broader weakness in chipmakers reflected investor concerns that major technology companies may be spending too aggressively on AI infrastructure, particularly data centers.

Market participants are now awaiting quarterly earnings from Microsoft, Amazon, Apple and Meta Platforms, which are expected to provide further insight into AI investment trends and demand for semiconductor products.

Despite broader technology weakness, software stocks recovered from earlier losses during the session.

Microsoft gained ahead of its earnings release, while Amazon traded little changed.

Apple also advanced, becoming the second company to reach a $5 trillion market capitalization before its earnings report later this week.

Elsewhere, Corning declined after issuing third-quarter sales guidance below analyst expectations, while IQVIA Holdings jumped 12% after raising its annual profit forecast.

Lower oil prices and Fed decision remain key market drivers

Falling oil prices provided additional support for equities as investors assessed easing geopolitical tensions in the Middle East and Ukraine.

West Texas Intermediate crude fell about 5% to just above $78 per barrel, while Brent crude settled down 4.8% at $84.09 per barrel.

Oil prices declined amid expectations that diplomatic efforts involving Iran, Saudi Arabia and Oman, along with discussions involving Ukraine, could reduce geopolitical risks.

Lower energy prices also supported investor appetite for sectors outside technology, reinforcing the broader market rotation that has developed in recent weeks.

Attention now turns to the Federal Reserve's monetary policy announcement on Wednesday.

According to the CME FedWatch Tool, traders see a 71% probability that the central bank will leave interest rates unchanged, while assigning a 29% chance of a 25-basis-point rate hike.

Investors will closely monitor the Fed's policy statement and outlook for clues on future interest-rate moves, particularly as higher borrowing costs could weigh on companies making significant investments in artificial intelligence infrastructure.