The S&P 500 rose 0.6%, reaching its first record high in two months, buoyed by resilient corporate profits 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 0.6% as of 9:54 a.m.
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.
See more: S&P 500 Snapshot: Stocks Rally to Close Out Flat Week
“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.”
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.
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.
Elsewhere in US equities, 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 worrying. 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.
Semiconductor stocks have led the broader market this year, supported by solid fundamentals and favorable technical signals. Valuations for the group also remain below historical averages. Analysts expect earnings growth across all technology industries, although four of the six groups are projected to see growth slow from the previous year. Overall, the earnings backdrop remains supportive for the sector.
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.
The latest boost for the AI trade came from Advanced Micro Devices Inc. Chief Executive Officer Lisa Su, who 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.
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 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.
Among other stock movers, Nike Inc. fell 0.7% after Berenberg cut its recommendation to sell from hold. The brokerage sees more downside for the shares from challenges to Nike’s position in the sportswear market and weakness in China.
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