US stocks rise to a record on expectations companies will make even
fatter profits
[October 07, 2026] By
STAN CHOE
NEW YORK (AP) — The U.S. stock market has never been higher, even as the
list of challenges chipping away at it keeps growing.
The S&P 500 climbed 0.6% Tuesday to a record after topping its prior
all-time high set in August. Despite worries about everything from war
to high inflation to pressure from the bond market, the index at the
heart of many 401(k) accounts has soared 23% since hitting a bottom in
late March.
The Dow Jones Industrial Average added 253 points, or 0.5%, while the
Nasdaq composite tacked 0.4% onto its own all-time high set the day
before. The record-high stock prices are helping investors feel better
about their finances, or at least less bad, when Americans are generally
feeling discouraged about keeping up with the fast-rising cost of
living.
Many of the fears that sent the U.S. stock market to its bottom in March
have indeed come true. Oil prices are high because of the war with Iran,
which has made inflation worse. Yields have cranked higher in the bond
market, which threatens to slow the economy by making it more expensive
for everyone to borrow money. And Americans broadly say they’re feeling
more pessimistic about the economy and where it’s heading.
But one vital source of support has remained resolute for the U.S. stock
market throughout: the relentless ability for companies to make more
money.
Lamb Weston, which sells frozen fries and other potato products, said on
Tuesday that its profit and revenue during its latest quarter topped its
projections, for example. The results also beat analysts’ expectations,
and its stock rallied 7.5%.
CEO Mike Smith said the company continues to deal with unexpected
increases in freight and other expenses. But the company nevertheless
raised its forecast for an underlying measure of profit for its full
fiscal year.
It’s not just potato products proving to be profitable. All kinds of
companies are lining up to report soon how much profit they made from
July through September, and expectations are high. Delta Air Lines will
report its third-quarter results on Friday, with several of the
country’s biggest banks headlining the following week.
Analysts expect companies in the S&P 500 to deliver overall growth of
nearly 30% in earnings per share from a year earlier, according to
FactSet. If they’re correct, it would be the third straight quarter of
growth better than 25%.
That’s crucial because corporate profits are one of the main levers that
set prices for stocks, along with interest rates. At the moment, high
bond yields are making investors less willing to pay high prices for
investments that aren’t bonds. But the simultaneous strength for
corporate profits is allowing the market to stay high and “to win the
tug-of-war against yields,” according to strategists at Barclays.
To be sure, much hinges on companies actually meeting those expectations
for fatter profits. If they fail to do so, stock prices could easily
fall off their records. Some critics also point to a possible bubble in
stocks in the artificial-intelligence industry after how much they
soared in the frenzy around the technology.
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Commuters emerge from a Wall Street subway station in New York's
Financial District on Wednesday, Oct. 30, 2024. (AP Photo/Peter
Morgan, File)
 AI stocks have been a huge force
driving the U.S. market to records, including Nvidia’s 28.3% surge
so far this year. That's roughly double the broad market’s gain.
Constellation Energy jumped 12.2% for one of Tuesday’s biggest gains
in the S&P 500 because it’s also riding that rising tide.
It announced a long-term deal to supply Google with about as much
electricity as a new nuclear reactor makes. The boom in AI data
centers has made not just electricity more in demand but also
construction crews and materials throughout the economy.
Elsewhere on Wall Street, Option Care Health soared 32.6% after CD&R
and McKesson said they’re buying the provider of infusion services.
The two are paying $32.05 for each Option Care Health share, valuing
it at roughly $5.8 billion.
All told, the S&P 500 rose 44.98 points to 7,818.93. The Dow Jones
Industrial Average added 253.38 to 51,521.28, and the Nasdaq
composite climbed 122.48 to 27,599.79.
Bond yields offered some slack on Tuesday after falling back from
their highest levels in years or even decades. The yield on the
10-year Treasury, which is the focal point of the U.S. bond market,
eased to 5.28% from 5.31% late Monday.
It fell after oil prices steadied themselves somewhat. The price for
a barrel of Brent crude oil, the international standard, dropped to
roughly $97 in the morning before pulling back to settle at $100.58.
While that was up 0.3% from Monday’s settlement price, it’s still
below the nearly $110 it was at a few weeks ago.
In stock markets abroad, indexes ticked higher in Europe as yields
continue to swing in their bond markets amid concerns about high
government debts and tight budgets. In France, tens of thousands of
demonstrators marched in support of protests by students demanding
more funding for schools.
In Asia, Japan’s Nikkei 225 jumped 1.1%, and Hong Kong’s Hang Seng
climbed 1%, but South Korea’s Kospi dropped 0.9%.
___
AP Business Writers Chan Ho-him and Matt Ott contributed to this
report.
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