* Yen weakens after recent rally, fiscal policy worries

investors

* Dow, S&P 500, global stock index hit intraday records

* U.S. Treasury yields ease

(Updates to US midday)

By Caroline Valetkevitch and Stefano Rebaudo

NEW YORK/MILAN, Aug 4 (Reuters) - Stock indexes rose sharply

on Tuesday, with the Dow and S&P 500 hitting record highs

following upbeat forecasts from Caterpillar ( CAT ) and other

companies, and oil prices extended recent sharp declines.

A global stock index also hit a record intraday high.

The Japanese yen weakened, but held on to most of its

intervention-driven gains after last week's joint action by

Tokyo and Washington to support the currency.

Weighing on oil were comments by Qatari and U.S. officials that

raised hopes for a diplomatic resolution to the Iran war that

could improve oil flows through the Strait of Hormuz.

U.S. Secretary of State Marco Rubio said on Tuesday there was

progress in talks with Iran and Oman about moving more ships

through the strait, but a final agreement had yet to be reached.

Treasury Secretary Scott Bessent earlier said that a deal with

Iran to reopen the strait could come as soon as Tuesday or

Wednesday.

U.S. crude fell 5.43% to $75.98 a barrel and Brent

dropped to $79.38 per barrel, down 5.24% on the day.

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

industrial economy, rose after the company increased its annual

revenue growth forecast as it benefited from a buildout of AI

data centers, while shares of Palantir Technologies ( PLTR )

surged as the company also raised its annual revenue forecast.

Investors are reacting to "stronger earnings and stronger

expectations," said Oliver Pursche, senior vice president and

adviser for Wealthspire Advisors in Westport, Connecticut.

"There's a general sense of optimism out there and that's being

reflected."

More than 80% of S&P 500 companies are beating analysts'

earnings expectations for the last quarter, according to LSEG

data.

The Dow Jones Industrial Average rose 933.95 points, or

1.76%, to 54,112.36, the S&P 500 rose 115.96 points, or

1.53%, to 7,716.66 and the Nasdaq Composite rose 548.22

points, or 2.12%, to 26,462.11.

MSCI's gauge of stocks across the globe rose

12.87 points, or 1.14%, to 1,143.88.

The pan-European STOXX 600 index rose 0.73%.

YEN EASES AFTER INTERVENTION-DRIVEN RALLY

The Japanese yen weakened 0.18% against the greenback to

157.45 per dollar after coordinated intervention by U.S. and

Japanese authorities to prop up the yen last week.

The Japanese currency remains stronger against the greenback

compared with levels a week ago that prompted official support

and marked the first U.S. intervention in the Japanese foreign

exchange market in 15 years.

However, Japan's expansionary fiscal policy and the Bank of

Japan's gradual pace of rate hikes could weigh on the yen, some

market participants warn.

The dollar index, which measures the greenback against a

basket of currencies, fell 0.1% to 99.91, with the euro

up 0.11% at $1.152.

U.S. Treasury yields fell as oil prices tumbled on hopes for a

deal to end the Iran war. That led traders to reprice for lower

odds of a Federal Reserve interest rate hike in September.

Most analysts believe Fed Chair Kevin Warsh does not want to

hike rates, and the incoming data could provide him enough cover

to stay put.

The yield on benchmark U.S. 10-year notes fell 4.91

basis points to 4.635%.