Hormuz deal hopes lift the Dow 900 points to a new S&P high

Good morning. Wall Street jumped on a single sentence last night. Treasury Secretary Bessent said a deal with Iran to reopen the Strait of Hormuz could come as soon as Tuesday or Wednesday. If the strait opens, oil can flow again, and crude fell close to 5%.

Cheaper oil takes pressure off prices, which weakens the case for higher interest rates, and earnings helped too. The Dow rose nearly 900 points for its best day in about two months, and the S&P 500 closed above 7,700 for the first time, a new record after 42 days.

In AI, Palantir changed the mood. Its shares had slumped this year, but sales jumped 93% from a year earlier and it raised its outlook, giving software stocks a lift. Analysts also said the forced selling that followed July's collapse of an AI-focused hedge fund is over, which helped the rebound. Chip stocks are still in a bear market, though, so not every AI name is celebrating.

It is too early to relax. Iran says nothing is settled, and the 10-year Treasury yield sits at its highest since early 2025. Bessent defended Fed Chair Warsh, saying markets are detoxing from too much Fed guidance, but the Fed's credibility faces another test ahead of Friday's jobs data.