Crude's Slide to 3-Week Low Lifts Tech Shares as Stocks Extend Gains

WTI crude oil fell more than 2% to a 3-week low on Tuesday after Japan's Kyodo News Agency reported that Iran has proposed to reopen the Strait of Hormuz within seven days if the US blockade of Iranian ports is lifted. The drop in energy prices eased inflation risks, pulled bond yields lower, and pushed the S&P 500 to a 5-week high.

The S&P 500 Index rose 0.09%, the Dow Jones Industrial Average slipped 0.13%, and the Nasdaq 100 gained 0.52%, reaching a 3.5-month high. December E-mini S&P futures added 0.05%, and December E-mini Nasdaq futures climbed 0.46%. Markets also drew support from positive anticipation ahead of a summit later this week between Presidents Trump and Xi Jinping.

Crude extended losses on signs diplomacy may end Middle East hostilities. A spokesman for Iran's Islamic Revolutionary Guard said, "if our national interests require us to negotiate alongside the war, we must negotiate." People familiar with the matter said Saudi Arabia is in the early stages of restarting its East-West pipeline and resuming crude exports from its Red Sea port of Yanbu later this week.

Rates Fall as Inflation Fears Ease

The 10-year Treasury note yield fell 3 basis points to 4.93%, with December 10-year T-notes up 6 ticks. Supply pressures may cap further gains: the Treasury will auction $211 billion of T-notes and floating-rate notes this week, starting with $69 billion of 2-year notes on Tuesday.

European yields moved lower too. The 10-year German bund yield slid to a 1.5-week low of 3.425%, down 2.8 bp at 3.430%, while the 10-year UK gilt yield fell to a 2-week low of 5.166%, down 2.4 bp at 5.188%.

ECB Chief Economist Philip Lane said a new wave of high energy prices means Eurozone inflation will stay elevated longer than the ECB initially anticipated. Markets discount a 43% chance of a +25 bp ECB rate hike at the October 29 meeting and a 53% chance of a +25 bp Fed hike at the October 27-28 FOMC meeting.

Chipmakers and Travel Stocks Lead

The iShares Semiconductor ETF (SOXX) rose 0.55% to a 5-week high. SanDisk (SNDK) jumped more than 7% to lead S&P 500 gainers, with Seagate Technology (STX) and Western Digital (WDC) each up more than 4%. Micron Technology (MU) added more than 3%, and Marvell Technology (MRVL) gained more than 1%.

Cheaper fuel lifted travel names. Carnival (CCL) and Norwegian Cruise Line (NCLH) rose more than 4%, while American Airlines (AAL), United Airlines (UAL), Delta Air Lines (DAL), Southwest (LUV), Alaska Air Group (ALK), and Royal Caribbean (RCL) advanced more than 3%. Trucking and freight stocks also climbed: Knight-Swift (KNX), ArcBest (ARCB), Saia (SAIA), and XPO (XPO) gained more than 2%, with FedEx Freight, JB Hunt (JBHT), and Marten Transport (MRTN) up more than 1%.

Energy stocks bore the brunt of the crude slide. Valero Energy (VLO) fell more than 3%, Marathon Petroleum (MPC) dropped more than 2%, and ConocoPhillips (COP), Phillips 66 (PSX), Diamondback Energy (FANG), APA Corp (APA), Baker Hughes (BKR), and Halliburton (HAL) each lost more than 1%.

Single-Stock Movers

Viking Therapeutics (VKTX) surged more than 32% after study results showed patients taking its VK2735 GLP-1 weight-loss drug maintained up to 97% of weight loss versus 61% for placebo.

Vicor Corp (VICR) climbed more than 13% after raising Q3 revenue growth guidance to over 20% quarter-over-quarter from a prior estimate of 10%, citing royalties from a non-exclusive license to Vertical Power Delivery.

Shopify (SHOP) rose more than 7% to lead Nasdaq 100 gainers after announcing it was "partnering deeply" with Meta Platforms' Muse artificial intelligence agent. AutoZone (AZO) gained more than 4% after reporting Q4 EPS of $56.05, beating the $54.03 consensus. Amgen (AMGN) advanced more than 3% to lead Dow gainers after saying the primary endpoint was met in a Phase 3 study of its dazodalibep drug in adults with Sjogren's disease.

Quest Diagnostics (DGX) fell more than 3% and Labcorp Holdings (LH) dropped more than 2% after the Centers for Medicare and Medicaid Services released new preliminary Medicare payment rates for lab services.

Overseas and on Deck

The Euro Stoxx 50 rose 0.61% to a 1.5-week high, and China's Shanghai Composite closed up 0.067% at a 2-week high. Japanese markets were closed for a national holiday.

Quarterly reports due include AutoZone, KB Home (KBH), MillerKnoll (MLKN), Thor Industries (THO), and Worthington Enterprises (WOR). With President Trump set to address the UN General Assembly later Tuesday and the Trump-Xi summit approaching, oil-driven disinflation and diplomatic headlines will keep driving the tape.