Wall Street today: US stocks nears record highs amid earnings optimism, tech rally; S&P, Nasdaq rise 0.8%

US stocks moved closer to record highs on Tuesday, helped by stronger earnings expectations, easing oil prices and a renewed rally in technology shares.The S&P 500 rose 0.8 per cent and was on course to close above its previous record set in August. The Dow Jones Industrial Average gained 343 points, or 0.7 per cent, while the Nasdaq Composite added 0.8%, moving towards a fresh record after reaching an all-time high a day earlier.The gains have come despite continued concerns over inflation, elevated bond yields and the economic impact of the war with Iran. The S&P 500 has risen nearly 24% since hitting its low in late March.A key support for the rally has been expectations of stronger corporate profits. Analysts expect companies in the S&P 500 to report nearly 30% growth in earnings per share for the July-September quarter, according to FactSet. If realised, it would mark the third consecutive quarter in which earnings growth exceeded 25%.The easing in oil prices also provided some relief. Brent crude fell 1.1% to $99.19 a barrel, down from nearly $110 a few weeks ago. The decline helped push the yield on the 10-year US Treasury note down to 5.26%, from 5.31% on Monday.Software stocks stage a comebackUS software stocks have emerged as another driver of the market's recent strength, with investors increasingly betting that artificial intelligence will help rather than destroy demand for many software companies.The S&P 500 software and services index rose 1.3 per cent on Tuesday to its highest level since November 2025. The index also recorded its strongest quarterly gain since the second quarter of 2020 during the July-September period.Companies including Salesforce, ServiceNow and Accenture have reported strong results, while partnerships with AI companies have helped improve sentiment towards the sector. Cybersecurity stocks have performed particularly strongly as businesses increase spending to protect systems in the age of AI.CrowdStrike, Fortinet and Palo Alto Networks have all recorded triple-digit gains this year.“AI has been more of an enabler for a lot of these software companies, more than a disruptor,” said Adam Turnquist, chief cross-asset strategist at LPL Financial.The software index is up about 5% this year, while the Philadelphia Semiconductor Index has surged 87.5%, although chip stocks have pulled back from their highs. Meanwhile, expectations for software-sector earnings growth in 2026 have climbed to 20.6%, from 13.8% at the end of March, according to LSEG data.Software stocks suffered a sharp selloff earlier this year, with the sector falling more than 26% from late January to its April low. The decline was driven by fears that companies could use AI to develop software internally at a much lower cost, threatening traditional software providers.Those concerns now appear to have eased as companies report continued demand and greater adoption of AI tools.“The whole SaaSpocalypse didn't happen anywhere near as fast as some of the people on Wall Street thought it would,” said Rebecca Wettemann, CEO of technology research firm Valoir.However, analysts warn that AI remains a longer-term risk for the industry. Brian Mulberry, chief market strategist at Zacks Investment Management, said the more significant test for software companies could come in the second half of 2027, when greater data-centre capacity could make AI-powered coding a bigger challenge for traditional software businesses.Additionallly, several major companies are due to report results in the coming days. Delta Air Lines is scheduled to report third-quarter earnings on Friday, followed by several major US banks next week.In overseas markets, European stocks edged higher as investors continued to monitor government debt and bond yields. Japan's Nikkei 225 rose 1.1%, Hong Kong's Hang Seng gained 1%, while South Korea's Kospi fell 0.9%.You use AI every day. Now get your AI Quotient. Take the AIQ test.