S&P, Nasdaq record closes as oil rebounds and trade deficit widens

On Tuesday, U.S. equities extended their gains, with the S&P 500, Nasdaq Composite and Nasdaq 100 all finishing at record levels. The Dow also advanced, while the Russell 2000 declined. Large-cap buyers remained in charge, while smaller companies sat out the rally.

The economic data in focus was the U.S. trade deficit, which came in wider than anticipated, as imports were boosted by the AI buildout. Meanwhile, Middle East tensions kept crude oil volatile. After an initial drop, prices rebounded and traded near their session highs at the equity close.

Treasury yields ended the session mixed:

Late in the session, yields were lower:

• 2-year: 4.7975%, down 3.55 basis points.
• 5-year: 5.0356%, down 3.04 basis points.
• 10-year: 5.2815%, down 2.95 basis points.
• 30-year: 5.6599%, down 0.41 basis points.

This difference is significant. The largest declines were seen in shorter maturities as traders removed tightening expectations. The probability of an October rate hike now stands at 19.4%, while there is a 70% chance of a 25 basis point increase by year-end.

U.S. equities: record highs but uneven participation.

The final readings were:

• Dow industrial average: 51,526.14, up 253.03 points or 0.49%.
• S&P 500: 7,818.92, up 44.96 points or 0.58%.
• Nasdaq Composite: 27,599.79, up 122.48 points or 0.45%.
• Russell 2000: 2,830.30, down 16.84 points or 0.59%.
• Nasdaq 100: 31,224.47, up 148.03 points or 0.48%.

The record closes for the S&P and Nasdaq convey one narrative, while the Russell's drop conveys another. The advance persisted at the index level, yet market participation was not uniform. It is worth monitoring as traders evaluate whether a further climb will draw in more of the market.

U.S. trade deficit: AI buildout boosts imports.

August's trade deficit expanded to $105.6 billion, exceeding the $102.0 billion forecast and the revised $92.8 billion gap from July. Imports advanced 4.3%, while exports increased 1.4%.

Industrial supplies and capital goods were key drivers of the import growth, in line with AI infrastructure demand.

A larger trade deficit can drag on reported GDP. Yet equipment imports also represent investment, spending that could raise productive capacity even as it enlarges the current shortfall.

Crude oil: early drop flips to a late rebound.

Tensions in the Middle East kept oil traders alert. Crude gave back its earlier decline and was trading close to session peaks when the equity market closed.

• WTI futures: $89.97, up $0.54 or 0.60%.
• Spot U.S. oil: $89.93, up $0.64 or 0.72%.

The rebound serves as a reminder that supply-risk news can shift the mood quickly. Oil's earlier slide had provided some inflation relief. That relief was diminished by the recovery, which kept the Middle East central to traders' focus.

Gold and silver advanced.

Late in the session, both precious metals were higher:

• Spot gold: $4,163.40, up $23.12 or 0.56%.
• Silver: $61.3570, up $0.3150 or 0.52%.

Gold rose even as the 10-year Treasury yield was up, a move that usually acts as a drag. Lower yields at other points on the curve provided some support, and geopolitical uncertainty stayed a possible demand catalyst.

Bitcoin stays on the sidelines during the equity rally.

Bitcoin changed hands at $85,624, a decrease of $132, or 0.15%.

The drop was slight, yet bitcoin failed to track the major stock indexes upward. For the session, the equity rally to records did not produce a similar move in cryptocurrencies.

What might carry into the coming session?

Large-cap equity buyers still hold the reins, but the Russell's soft performance warrants attention. The AI investment narrative remains visible in trade figures, and oil continues to respond to Middle East headlines. With Treasury yields mixed, traders have much to consider while awaiting the next catalyst.