The benchmark index pushed above 7,800 as artificial intelligence stocks and strong earnings expectations outweighed concerns about high Treasury yields and energy prices.
The S&P 500 climbed to a fresh record high on Tuesday and surpassed the 7,800 mark for the first time in its history. The index closed at 7,818.93 as investors focused on artificial intelligence and the upcoming earnings season. The 10-year Treasury yield remained above 5% after recently reaching its highest level since 2002.
Investors are seeing strong corporate earnings growth which is helping offset the pressure from high yields. Analysts expect S&P 500 companies to post earnings growth above 30% year over year. Nvidia’s market value is nearing $6 trillion as artificial intelligence spending continues to drive gains.
The rally was not limited to a few large tech names. All 11 S&P 500 sectors traded higher earlier Tuesday as the rally broadened beyond technology stocks. Utilities and real estate also performed well as bond yields eased from their recent peak.
The Nasdaq also closed at a new record level on Tuesday while the Dow gained nearly 0.5% but remained more than 5% below its August record. Despite the rise in bond yields investors are still optimistic about corporate profits outpacing borrowing costs.
Wall Street has also grown more optimistic that the U.S. Federal Reserve will leave interest rates unchanged at its next policy meeting in October. The U.S. bond market has been volatile recently because of concerns over inflation and government borrowing. Treasury yields have reached multi-decade highs as investors weigh persistent inflation pressures.
For American consumers higher energy prices continue to be a major concern. AAA reported that regular gasoline averaged about $4.37 a gallon on October 6 compared with about $3.16 a year earlier. The economy is expected to be a top issue in the upcoming midterm elections with many voters expressing frustration over high prices.
Investors are watching third-quarter earnings; Federal Reserve comments; inflation data; and Treasury yields in the coming weeks. Strong earnings paired with easing yields could give stocks more room to advance while weaker profits and rising yields could put renewed pressure on the market.
Oil prices have remained elevated as markets react to the conflict involving Iran and disruptions to global energy supplies. Some analysts believe that stabilizing energy costs could help ease inflation concerns and reduce pressure on bond yields. The AI trade also remains strong with semiconductor stocks continuing to attract investors.
Fed rate hike expectations have been responsive to oil prices which threaten broader inflation pressures. Some analysts expect the Fed to take no action at its October 27-28 meeting. High oil prices have hit a broad range of consumers according to market strategists.
Power companies have also attracted investor attention as growing electricity demand from artificial intelligence data centers drives new investment. Canadian utility Emera announced a major agreement with Canadian Utilities on Tuesday while ATCO plans to separate its non-utility businesses into a publicly traded company.
There were 258 new highs and 219 new lows on the New York Stock Exchange on Tuesday. Advancing stocks outnumbered decliners by a 1.93-to-1 ratio on the exchange.
The record close shows that investors remain willing to buy stocks despite historically high borrowing costs and continued uncertainty about inflation.
IMAGE: NVIDIA ASCII logo.webp” as the work of Wikideas1 from April 28 2024. It was released under the CC0 1.0 Universal Public Domain Dedication