* US job openings drop in June, hiring increases

* Palantir ( PLTR ) jumps after raising annual revenue forecast

* Caterpillar ( CAT ) rises after reporting higher Q2 profit

(Updates to market close)

By Chuck Mikolajczak and Johann M Cherian

NEW YORK, Aug 4 (Reuters) - The S&P 500 and the Dow closed

at record highs on Tuesday, powered by the latest batch of

earnings from AI-related companies such as Caterpillar ( CAT ) and

Palantir ( PLTR ) that assuaged demand concerns, while crude prices and

Treasury yields dropped on hopes for a deal in the Iran war.

Palantir Technologies ( PLTR ) soared nearly 30% and

recorded its biggest daily percentage gain since February 2024,

after raising its annual revenue forecast.

Caterpillar ( CAT ), seen as a bellwether for the global

industrial economy, jumped after raising its annual revenue

growth forecast, as the buildout of AI data centers has fueled

demand for its power-generation and construction equipment.

The move in Caterpillar ( CAT ) made it the biggest boost to the Dow

Industrials, accounting for more than 300 points to the upside

for the venerable average.

Investors have been closely monitoring results from

AI-linked companies this earnings season for any signs the

massive spending in the space will be justified.

OIL PRICES DROP ON IRAN DEAL HOPES

Also supporting stocks was a drop of about 5% in crude

prices after a Qatari official said efforts to secure a

diplomatic resolution to the conflict were continuing, while

U.S. Treasury Secretary Scott Bessent said a deal with Iran to

reopen the Strait of Hormuz could come within the next two days.

The tumble in oil prices also dented expectations for a rate

hike from the Federal Reserve at its September meeting down to

56.9% from 67.2% in the prior session, according to CME

FedWatch, which contributed to a retreat in U.S. Treasury

yields.

"I don't sense one ounce of skepticism among investors, from

oil to interest rates to equities," said Jack Ablin, chief

investment strategist and founding partner at Cresset Capital

Management in Chicago.

"The earnings reports were certainly supportive, and that's

great news, but I'm not sure a handful of earnings reports

justifies new records in the S&P."

MAJOR AVERAGES SURGE HIGHER

According to preliminary data, the S&P 500

gained 137.20 points, or 1.81%, to end at 7,737.70

points, while the Nasdaq Composite gained 668.10 points,

or 2.58%, to 26,581.99. The Dow Jones Industrial Average

rose 912.25 points, or 1.72%, to 54,090.66.

The Dow recorded a closing high for a second straight day

after notching its first since July 6 on Monday, while the S&P

500 on Tuesday secured its first closing record since July 2.

Chip stocks, also seen as beneficiaries of AI-spending,

surged. The Philadelphia Semiconductor index shot up

nearly 7% and rose for a fourth straight session after tumbling

20.6% in July.

The S&P 500 tech sector gained as the best performing of the

11 major S&P sectors.

Results from corporate earnings this quarter have mostly

been robust. Of the 304 companies in the S&P 500 that have

reported second-quarter earnings as of Friday, 85.2% have beaten

estimates, versus the long-term average of 67.5%, according to

LSEG data, with every major S&P sector showing profit growth.

Elon Musk's SpaceX will release its first earnings

report since its public debut after markets close. The company's

shares jumped before the announcement.

McDonald's advanced despite reporting disappointing

results, while Pfizer ( PFE ) gained after reporting upbeat

quarterly results.

On the data front, job openings dropped in June, weighed

down by a sharp decline in the healthcare and social assistance

sector, but a rise in hiring and low layoffs suggested the labor

market remained stable. The data is the first in a series of

reports on the labor market this week that will culminate in

Friday's government payrolls report.