Wall Street Soars on Iran Diplomacy; Dow Hits Record as Amazon Crosses $3 Trillion

U.S. stocks kicked off August with a robust start, sending the Dow Industrials to a record closing high, as signs of de-escalating tensions between the U.S. and Iran pulled down oil prices and Treasury yields during a busy week for earnings reports.

Hormuz Diplomacy and Macro Relief

The reduction in geopolitical risks has invited investor confidence back into the market, alleviating some of the suppressive pressures on equities. U.S. President Donald Trump's announcement that talks to reopen the Strait of Hormuz would take place on Monday—disputed by Iran—triggered a sharp decline in crude oil prices.

■Crude oil prices settled down by approximately 5%.

■The drop in oil prices helped push U.S. Treasury yields lower.

■Market participants continue to gauge the odds of a rate hike from the Federal Reserve should the conflict with Iran prolong.

Art Hogan, chief market strategist at B. Riley Wealth, summarized the market's daily sentiment: "Every day, everybody wakes up and looks at the price of a barrel of oil and the yield on the 10-year, and if that's going lower, the market's OK, and if it's going higher, the market's not good whatsoever."

Robust Earnings and a $3 Trillion Milestone

Corporate earnings this quarter have served as a foundational pillar for the equity rally. According to LSEG data, the 304 companies in the S&P 500 that have reported earnings through Friday have delivered a performance significantly above expectations.

■Earnings showed a robust growth rate of 29.3% compared to the previous year.

■85.2% of reporting companies topped analyst expectations.

■Amazon shares advanced 4.6%, pushing the company's market cap above $3 trillion for the first time following its results last week.

■SpaceX, set to report its first quarterly results since going public on Tuesday, jumped 5.6%, despite trading below its $135 issue price for nearly three weeks.

Communication services was the best performing sector among the 11 major S&P sectors, climbing 4.3% on the back of gains from Meta Platforms and Alphabet. Conversely, the energy sector dropped 1.2% as the worst performer, mirroring the decline in crude prices.

Sector Movements and M&A Whispers

While stocks struggled in July due to global concerns about the AI trajectory, the U.S.-Iran conflict, and the path of interest rates, the start of August suggests a shift in sentiment. Meanwhile, significant merger news from the pharmaceutical sector also grabbed headlines.

■Bristol Myers Squibb shares edged up 0.2% following a report of preliminary merger talks with AstraZeneca.

■A potential deal could form one of the world's biggest drugmakers, worth nearly $400 billion.

■Other AI-related companies scheduled to report this week include Advanced Micro Devices, SanDisk, and Western Digital.

The market is interpreting the pullback in oil and yields as a reduction in inflationary headwinds, which compresses volatility premiums in the VIX. The strong earnings season is effectively de-risking portfolios, shifting dealers' gamma exposure into positive territory. This technical alignment, combined with fundamental beats, is driving the short-covering that propelled the Dow to record highs, suggesting the rally has both technical and fundamental support legs.