US stocks hit record high, shrugging off bond market turmoil
By John Towfighi, CNN
New York (CNN) — The artificial intelligence boom keeps rolling, sending stocks to record highs: The S&P 500 rose 0.7% on Tuesday and hit 7,830 points, an all-time high and its first intraday record high in almost two months.
The S&P 500 would need to end the day with a gain of roughly 0.3% to officially close at its first record high since August 13. It would mark the index’s 28th record high this year.
Wall Street is rallying again as investors rekindle enthusiasm about AI. The tech-heavy Nasdaq Composite closed at a record high on Monday.
Tech and AI stocks are doing the heavy lifting for pushing stock indexes back to record highs. Meanwhile, other sectors of the market have struggled in recent weeks under the pressure of bond yields trading at multi-year highs.
The key 10-year Treasury yield, which underpins the cost of financing debt and taking out mortgage rates and can influence economic activity, just hit its highest level since 2002.
Over the past month, tech is the only sector that has posted gains. Meanwhile, real estate, financials, materials and utilities have each dropped more than 5% as higher borrowing costs weigh on the outlook for stocks.
Stocks across sectors got a boost on Tuesday from a drop in oil prices and Treasury yields, which had put pressure on stocks in recent weeks. Brent crude fell 2% and traded at $98 per barrel — still up more than 30% since the start of the war with Iran but a relief from recent prices in the triple digits.
The S&P 500 and Nasdaq Composite are weighted by market value. The larger a company is by market value, the more influence it has on the index. At almost $6 trillion in market value, Nvidia accounts for more than 8% of the S&P 500. Nvidia is up 6% this month, boosting the major indexes.
Still, Wall Street is cautious about the rally being dependent on tech and whether higher bond yields could rain on the parade.
“The breadth of the rally has narrowed,” Ulrike Hoffmann-Burchardi, global head of equities at UBS, wrote in a note.
“We retain strong conviction in the AI growth story, and believe AI-related investment remains a powerful tailwind for the broader equity market,” Hoffmann-Burchardi said. “But the increasing concentration of market gains reinforces the importance of managing risk through a broadly diversified equity portfolio.”
Treasury yields moved lower Tuesday, but remained at multi-year highs. The 10-year yield traded at 5.29%, down from rising as high as 5.35% on Monday but still at its highest level since 2007.
Return to record highs
It’s been a choppy ride to all-time highs, but the S&P 500 has nonetheless rebounded and climbed, boosted by resurgent bouts of AI optimism, robust corporate earnings and a resilient US economic backdrop.
The S&P 500, a benchmark for trillions of dollars in retirement savings and personal investments, is up more than 14% this year and on track for its fourth-straight year of double-digit gains. The US stock market has overcome obstacle after obstacle, from an enormous energy shock to higher interest rates.
Recent optimism can be traced to last month, when Meta (META) launched its Muse personal assistant app that jumped to #1 on the App store. The successful launch reignited enthusiasm that tech companies can find ways to make AI for consumers and get them to consider paying for it, while also benefitting the chipmakers and companies involved in the AI buildout.
While the S&P 500 and Nasdaq are back at record highs, the blue-chip Dow Jones Industrial Average — which has less tech-exposure — is down roughly 5% from a record high set in early August.
Similarly, while the S&P 500 is at record highs, an equal-weight version of the S&P 500 that gives each stock the same weight is down more than 4% since its record high in mid-August.
The-CNN-Wire
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