Wall Street ends higher on revived AI momentum
US stocks closed higher on Tuesday, driven by a tech rally fueled by news of Anthropic's impending IPO. The tech-heavy Nasdaq led gains, while the Federal Reserve began its penultimate meeting of the year.
An AI-fueled tech rally sent US stocks to a higher close on Tuesday as third-quarter reporting season gained steam, while the Federal Reserve convened for its penultimate meeting of the year. The tech-heavy Nasdaq led the gains.
The buzz surrounding details of Anthropic's impending initial public offering helped boost chip stocks for the third consecutive session. Growing concerns over the viability of debt-funded spending amid rising borrowing costs have weighed on the AI trade this month. The Philadelphia SE Semiconductor index, while off more than 20 per cent from its June 22 record closing high, has outperformed the broader market this year, gaining 62.1 per cent compared with the S&P 500's 12.8 per cent year-to-date advance.
To fund its AI expansion, Meta increased its largest-ever equity fundraising to $97.5 billion, sending the Facebook parent's shares down 1.6 per cent. “(The Anthropic news) seems to be giving a little bit of a relief rally to the AI stocks, particularly the semis,” said Chuck Carlson, CEO at Horizon Investment Services in Hammond, Indiana, referring to chip stocks. “Those stocks have gotten clobbered in recent weeks and they were probably due for a bounce.”
Economic data showed rising new orders for computers and peripheral equipment, supporting the notion of strong AI-related spending. Nearly half of S&P 500 companies have reported third-quarter results. Of those, 83 per cent have delivered better-than-expected results, according to the most recent available LSEG data.
Boeing tumbled 10.7 per cent following its bigger-than-expected third-quarter loss, while water-management company Xylem slid 14.2 per cent after trimming full-year forecasts. United Parcel Service advanced 5.8 per cent after the package delivery firm raised its annual revenue and profit forecasts. Sherwin-Williams' quarterly profit miss sent the stock 2.7 per cent lower, weighing on the Dow. Royal Caribbean rose 5.5 per cent after the cruise operator lifted its full-year profit forecast.
The Fed convened on Tuesday for its October monetary policy meeting, which is widely expected to culminate in a decision to keep the fed funds target rate on hold in the 3.75 per cent to 4 per cent range, saving its second rate hike of the year for its final meeting in December, according to CME's FedWatch tool. “There seems to be more confidence that the Fed isn't going to do anything at this meeting, partly because we have an election on Tuesday,” Carlson added. “There's probably at least some relief that the rate situation is not going to get in the way of a rally.”
The Dow Jones Industrial Average rose 15.99 points, or 0.03 per cent, to 52,377.57, the S&P 500 gained 45.83 points, or 0.60 per cent, to 7,722.60 and the Nasdaq Composite gained 308.43 points, or 1.18 per cent, to 26,477.81. Of the 11 major sectors in the S&P 500, technology led the gainers, while energy shares suffered the steepest percentage decline, hit by easing crude prices as attention turned to Middle East peace negotiations.