The S&P 500 closed above 5,000 for the first time on Friday and the NASDAQ briefly traded above 16,000, with boosts from megacaps and chip stocks, including Nvidia Corp as investors bet on artificial intelligence (AI) technology and eyed strong earnings data.
Nvidia finished up 3.6 percent and hit a record high after Reuters reported it was building a new business unit focused on designing bespoke chips for cloud computing firms and others, including advanced AI processors.
This was after the Wall Street Journal reported on Thursday that OpenAI chief executive officer Sam Altman was in talks with investors to raise funds for a tech initiative intended to boost chip-building capacity for power AI, among other things.
Photo: Bloomberg
“The AI story so far has been all about building the infrastructure, the chips, the data centers,” said David Lefkowitz, head of US equities at UBS Global Wealth Management, adding that the report “at least underscores that there’s potentially a tremendous amount of demand going forward for AI infrastructure.”
While Lefkowitz said the S&P and NASDAQ’s round number milestones likely would not change investors’ calculations of the market’s risk and reward prospects, he said “it raises the profile of what’s happening in the market.”
Along with outperformance by the Philadelphia semiconductor index, which closed up 1.99 percent, technology-focused market heavyweights including Microsoft Corp, Amazon.com Inc and Alphabet Inc also contributed to index gains.
With results from about two-thirds of S&P 500 companies, LSEG data now show Wall Street estimates for fourth-quarter earnings growth of 9.0 percent versus expectations for 4.7 percent growth on Jan. 1, while 81 percent of companies are beating estimates, compared with a 76 percent average in the previous four reporting periods.
“Earnings have been strong so far, above expectations,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. “And there was news about additional growth opportunities for Nvidia specific to cloud computing, another growth area besides AI. Those are the big drivers.”
The Dow Jones Industrial Average fell 54.64 points, or 0.14 percent, to 38,671.69, the S&P 500 gained 28.70 points, or 0.57 percent, to 5,026.61 and the NASDAQ Composite gained 196.95 points, or 1.25 percent, to 15,990.66.
Positive earnings and the boost from AI optimism have helped the S&P 500 to notch 10 intraday record highs so far this year.
The NASDAQ closed just 0.4 percent below its 16,057.44 record closing high registered in November 2021.
For the week, all three indices registered their fifth straight weekly gain with the S&P adding 1.4 percent, the NASDAQ rising 2.3 percent and the Dow climbing 0.04 percent.
Earlier, data showed US monthly consumer prices rose less than initially estimated in December last year, but underlying inflation remained a tad warm — a mixed picture that clouded expectations on the timing of interest-rate cuts from the US Federal Reserve.
Strong economic data and hawkish comments from Fed policymakers in recent days have dashed hopes the central bank would start cutting interest rates next month.
Ghriskey points to Fed official predictions in the “dot-plot,” which still imply a rate cut this year.
“The market does have the Fed’s wind at its back. Seemingly we’ve reached the top of interest rates. The next move is going to down. We don’t know when that’s going to be. The Fed keeps throwing cold water on that idea but their votes with the dots say they’re going to be easing in the second half,” Ghriskey said.
Market participants are awaiting data on last month’s consumer prices next week for more clues on when the Fed will cut borrowing costs.
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