NEW YORK, Oct. 28 (Xinhua) -- U.S. stocks climbed to new record highs on Tuesday, with all three major indices posting gains. The Dow Jones Industrial Average rose 0.3 percent, the Nasdaq Composite jumped 0.8 percent, and the S&P 500 edged up 0.2 percent, marking its third straight record close.
Robust corporate earnings, expectations of further Federal Reserve rate cuts, and enthusiasm in the artificial intelligence (AI) sector have all boosted market optimism since spring, analysts noted.
The latest batch of quarterly results shows that most large-cap technology and consumer companies have maintained profit growth despite signs of economic cooling.
Meanwhile, the Fed's pivot from consecutive rate hikes to rate cuts, with markets broadly expecting two more reductions this year, has increased valuation flexibility for growth stocks.
Ongoing enthusiasm for AI-driven growth has also buoyed sentiment. Companies leading in AI infrastructure, software, and semiconductor manufacturing continue to attract capital inflows, lifting broader indexes.
Yet some analysts caution that AI-fueled enthusiasm has inflated valuations and heightened market sensitivity to potential disappointments. They warn that the line between justified optimism and speculative excess is thinning.
As of now, about 29 percent of S&P 500 companies have reported Q3 2025 results. Among these, 87 percent have exceeded EPS (earnings per share) expectations.
Overall, the earnings season has started on a positive note, with companies broadly beating analyst forecasts and providing relatively optimistic guidance for upcoming quarters.
"Absent some truly surprising and unwelcome events, the current momentum in the stock market is likely to last through the end of the year," Emily Bowersock Hill, CEO of Bowersock Capital Partners, told CNN. Other strategists echoed that sentiment, attributing much of the current strength to fear of missing out on the rally.
Despite record highs, underlying U.S. economic indicators present a more complex picture. Consumer confidence fell again in October, hovering near levels last seen during the pandemic.
Analysts noted that potential tariff-driven price increases, a cooling labor market, and uncertainty over household wealth could weaken consumer spending growth in the coming months.
For now, investors appear willing to overlook short-term risks, betting that falling interest rates and ongoing corporate innovation will sustain the bull run.
The Fed's transition to easing after consecutive rate hikes, combined with expectations of two additional cuts this year, has encouraged renewed capital inflows into risk assets.
Yet as valuations climb and economic data soften, the sustainability of the current rally increasingly depends on whether policy easing can genuinely offset weakening fundamentals. ■