The S&P 500 rose 0.7% , reaching its first record high since August, buoyed by resilient corporate profits, the outlook for artificial intelligence-related spending and a pullback in oil prices.
The gauge is poised for a fourth consecutive advance and its longest winning run in about two months as investors look past lingering inflation concerns. The Nasdaq 100 gained 0.7% as of 12:38 p.m. The Cboe Volatility Index, or VIX, hovered below 15, while the 10-year Treasury yield slipped for the first time in three days. Brent crude prices fell below $100 a barrel on increased shipments from Gulf producers.
Strong corporate earnings, enthusiasm around the artificial intelligence trade and a US economy that has so far avoided a significant slowdown have fueled a roughly 14% advance in the S&P 500 this year. The rally is getting additional support from lower oil prices, which have helped temper concerns about rising consumer costs.
“Right-tail risks continue to be the pertinent one in US equities, especially in US tech,” Bank of America strategists including Benjamin Bowler wrote in a note to clients. “As tech optimism and FOMO overcome macro/policy uncertainty and crowd out other narratives, investors unwilling to lean into narrow AI/tech leadership increasingly risk underperforming.”
In the AI space, Marvell Technology Inc. shares jumped after raising guidance during an investor day. Vital Knowledge founder Adam Crisafulli called it a “very upbeat forecast,” making the chipmaker the latest to “provide a bullish update on conditions in the AI data center market.”
Separately, Advanced Micro Devices Inc. Chief Executive Officer Lisa Su said · chip demand is likely to remain “very high” for the next several years. Her comments come as the industry contends with growing scrutiny around AI safety.
To a large extent, investors’ confidence in the durability of this rally rests on stellar expectations for upcoming earnings from the tech giants that have driven the lion’s share of growth over the last few years. Third-quarter earnings per share for the tech sector are expected to jump around 66%, giving the group the second-fastest growth after energy, to help fuel the more than 24% rise in EPS anticipated for S&P 500 companies, according to Bloomberg Intelligence.
While semiconductor stocks have led the broader market this year, valuations for the group remain below historical averages. Overall, the earnings backdrop remains supportive for the sector.
Positioning in Nasdaq 100 futures has also improved. Citigroup Inc. strategists said the technology-heavy index posted the strongest weekly improvement in positioning among major markets as fresh risk-taking flows entered the market. Momentum has increasingly favored long positions in Nasdaq 100 futures.
“As long as the incremental info on AI ROI we get from earnings and Anthropic’s IPO filing over the next few weeks is good, there is little risk to the index,” said Kevin Brocks, director at 22V Research. “The recent macro data indicates there’s very little risk of recession, and not a large risk of the Fed needing to tighten financial conditions from here.”
In some corners of the US stock market the picture is more mixed. Strategists led by David Chew said investors are growing increasingly bearish on small caps by continuing to build short positions in Russell 2000 futures.
A major reduction in futures exposure is also worth watching. Non-dealers have sold almost $70 billion of S&P 500 futures over the past six weeks, according to an analysis of CFTC data, marking one of the largest positioning unwinds in roughly 15 years.
The scale of the selling is comparable with major positioning reversals seen in periods such as 2020 and 2022. But unlike those episodes, the market has barely moved: The S&P 500 is little changed over the six-week period.
Constellation Energy Corp. was the top-performing stock in the S&P 500 Tuesday, rising the most since April after a long-term deal to supply Google-parent Alphabet Inc. with nuclear power. The deal sparked gains in other independent power producers, including Vistra.
In deals, Paramount Skydance Corp. closed its $110 billion acquisition of Warner Bros. Discovery Inc. on Tuesday, 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. OpenAI is holding · talks with several investment funds from the United Arab Emirates, including Abu Dhabi-based MGX, about helping anchor a $30 billion financing round for the ChatGPT maker, people familiar with the matter said.
Option Care Health Inc. jumped 33% on a Financial Times report that McKesson Corp. and private equity firm Clayton, Dubilier & Rice are nearing a deal to acquire the medical infusion-services provider. The transaction would value the company at more than $5 billion including debt. In other news, Tesla Inc. will display its Cybercab robotaxi at the Paris Motor Show that kicks off on Oct. 12, according to the event’s organizer.
In the IPO market, DayOne Data Centers Ltd. filed · for a US listing, positioning the Singapore-based company to tap continued investor appetite for AI infrastructure.
Sectors to Watch
- Penn Entertainment and Boyd Gaming are both being upgraded to buy from hold by Deutsche Bank analysts, who said gaming companies look attractive in the wake of recent weakness.
- Shares in rocket, satellite, and space-linked companies rose during Tuesday’s regular session, with AST SpaceMobile Inc. and Satellogic Inc. among the top gainers.
- Nvidia Corp. is meanwhile approaching · a $6 trillion market value as investors return to the AI chipmaker. The stock had gained 28% this year through Monday, adding about $1.2 trillion to Nvidia’s market value and making it the single biggest contributor to the S&P 500’s advance.