US stocks ended the week inches away from record highs as investors brushed aside concerns around the artificial-intelligence spending spree and an energy crunch to prepare for the start of earnings season.
The S&P 500 Index rose 0.6% on Friday, while the Nasdaq 100 advanced 0.5% with the tech-heavy benchmark posting its fourth straight week of gains. A report that OpenAI expects to reach or exceed $70 billion in annualized revenue by year-end helped alleviate anxiety over the durability of the AI boom after an earlier report suggested the company’s sales would fall short of expectations. Some on Wall Street are pushing back on the narrative that the market has climbed too far, too fast.
“People are worried, and that’s not a sign of a bubble,” Christian Mueller-Glissman, a Goldman Sachs strategist, said in an interview on Bloomberg Television. “Usually, when you’re in the bubble, there’s a lot of exuberance, and people have FOMO.”
He also pointed to the J-curve dynamic of technology investment, in which substantial upfront capital spending can take time to translate into revenue growth and productivity gains.
As the bull market in US stocks approaches its fourth-year anniversary, it’s showing few signs of stress, with corporate profits rock-solid and the S&P 500 near its all-time high. A 117% advance in the equities gauge since 2022 makes it the third-largest bull market of that length in data going back to 1947, according to CFRA.
When the rally extends to a fifth year, the historical average gain is 21%, CFRA data show · . Theoretically, that leaves plenty of room for the rally to broaden out beyond technology megacaps that have driven the lion’s share of gains since October 2022.
Still, signs of strain in the AI trade are emerging. Nvidia Corp.-backed Firmus Grid Ltd. shelved plans for an Australian initial public offering just days after signaling strong demand for a deal that would have valued the data center company at $30 billion. Credit-default swap spreads on Oracle Corp. reached new highs, as Morgan Stanley warned that project delays could weigh on the company’s debt.
Even with the S&P 500 trading near its peak, stock-market breadth shows no signs of improvement. Only about a third of stocks in the index are trading above their 50-day moving averages. In mid-August that figure stood at 70%.
Just ahead of earnings season, US consumer sentiment fell in early October and views of current economic conditions hit an all-time low as inflation weighed on households.
Some of Wall Street’s biggest banks will report results next week. The sector has underperformed over the past month and investors will be looking for further clues on the state of the US consumer.
“The biggest signal we will get will not be from the consumer companies but the banks. It will be interesting to see how bank management characterizes the consumer from spending to credit,” said Joe Gilbert, portfolio manager at Integrity Asset Management. “We will be looking to see if credit has taken a leg down or if the K-shaped economy starts to converge.”
In corporate news, Deere & Co. shares posted the biggest weekly decline since April 2023, slouching alongside other farm equipment makers on dual setbacks: a regulatory inquiry and lower crop prices. HP Inc. shares fell 3.5% after IDC said worldwide shipments of personal computers dropped 20% in the third quarter from a year ago, hurt by supply constraints and inventory pull-in from earlier in the year. Moderna Inc. shares climbed 14% after a New York Times report on a plan involving the National Institutes of Health to fast-track the development and testing of cancer vaccines.
Apple Inc. shares fell 1.1% on a report that the company cut component orders for the iPhone 18 Pro and iPhone 18 Pro Max amid weaker-than-expected demand.
Sectors to watch
- Refining stocks hit session lows on Friday after President Donald Trump said Russia will be supplying diesel to the US.
- Shares in optical-equipment makers rallied after Lumentum noted that its components are “completely sold out” through early 2029 on demand from tech companies clamoring for faster AI data centers.
- Farm equipment makers fell, tracking corn and soybean futures, after the USDA raised yield and production estimates for the crops.
- Travel stocks were in focus after Delta cut its full-year outlook.
- Health insurers outperformed while Humana Inc. shares surged on the company’s improved performance on crucial Medicare Advantage quality ratings. Shares of CVS Health Corp. underperformed as ratings for some of its largest plans deteriorated.
- Shares in tower companies gained on SpaceX’s plan to acquire a nationwide low-band spectrum license portfolio, a deal analysts said is a positive catalyst for the sector.