Wall Street traders drove stocks to all-time highs on growing bets that Corporate America will be able to weather the threats from still-elevated energy costs and interest rates.
Just a week ahead of the earnings season, the S&P 500 headed toward its first record close since August. A rally in artificial intelligence-related shares also buoyed sentiment, with Nvidia Corp.’s market value approaching $6 trillion. Advanced Micro Devices Inc.’s Lisa Su predicted “very high” chip demand over the next few years. Treasury 10-year yields fell from the highest since 2002.
While bets on the path for global monetary policy and geopolitical developments have captured investors’ attention, a less discussed factor has been extraordinarily strong earnings expectations, said Kyle Rodda at Capital.com.
“The US economy remains supportive of corporate revenues and profits,” said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office.“A favorable growth environment and robust earnings suggest profit growth can broaden beyond technology.”
Analysts expect S&P 500 profits to jump about 25% in the third quarter from a year earlier, according to data compiled by Bloomberg Intelligence.
“Recent economic growth data have been strong and S&P 500 earnings revision breadth has remained positive,” Goldman Sachs Group Inc. strategists led by Ben Snider wrote in a recent note. “We expect most companies will once again surpass consensus earnings estimates this quarter.”
Equities have historically weathered rising-rate periods when the economy and profits kept growing, according to Anthony Saglimbene at Ameriprise.
“Stocks have room to move higher if the 2027 outlook for growth and profits remains firm, energy prices stabilize/fall, and the Fed signals its rate-hiking path will be short-lived,” he said. “Of course, any advance in stock prices through year-end will likely require a steady AI trade as well.”
As geopolitical fragmentation continues, most major economies are absorbing higher energy prices and tariffs better than expected, according to Tiffany Wilding and Andrew Balls at Pacific Investment Management Co.
“A booming AI investment cycle, the ability of consumers and China to absorb higher costs, and an incremental approach by central banks may help support growth while containing inflation,” they added.
Corporate Highlights:
- Paramount Skydance Corp. · closed its $110 billion acquisition of Warner Bros. Discovery Inc., completing one of the biggest media mergers of all time after engaging in a bruising battle for control with Netflix Inc. and fending off antitrust lawsuits.
- Alphabet Inc. · agreed to buy nuclear power from Constellation Energy Corp. in a deal that will spur the addition of 890 megawatts of new reactor capacity.
- Anthropic PBC · ’s Mythos AI model has dramatically increased global cybersecurity risks, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said.
- OpenAI · is in talks with multiple investment funds from the United Arab Emirates, including Abu Dhabi-based MGX, to help anchor a $30 billion round of financing for the ChatGPT maker, according to people familiar with the matter.
- Moonshot AI · has closed the final round of private fundraising at a valuation of about $50 billion and is heading toward an initial public offering in Hong Kong in the first quarter of next year, according to people familiar with the matter.
| Key Events This Week |
|---|
| For a list, click here. |
| Take our Markets Pulse survey |
|---|
| What will the outcome of midterm elections mean for US stocks and Treasury yields? Let us know . |
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.7% as of 1:11 p.m. New York time
- The Nasdaq 100 rose 0.6%
- The Dow Jones Industrial Average rose 0.6%
- The MSCI World Index rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.3% to $1.1257
- The British pound rose 0.4% to $1.3272
- The Japanese yen fell 0.2% to 158.17 per dollar
Cryptocurrencies
- Bitcoin fell 0.2% to $85,598.09
- Ether fell 0.6% to $2,697.02
Bonds
- The yield on 10-year Treasuries declined three basis points to 5.27%
- Germany’s 10-year yield declined two basis points to 3.48%
- Britain’s 10-year yield declined four basis points to 5.37%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold rose 0.6% to $4,163.65 an ounce