Wall Street extends record run
US stock indices were once again firmer across the board on Monday, with technology stocks leading the charge. The Nasdaq gained 0.7%, fuelled by a nearly 4% jump in Nvidia after the company announced plans to invest $100 billion in OpenAI to support the buildout of data centres.
Source: TN Trader
The S&P 500 and Dow also finished at fresh all-time highs, adding 0.4% and 0.1% respectively, while the small-cap, domestically focused Russell 2000 rose 0.6%, trading within easy reach of last week’s record levels.
This means that the giant corporations which make up the ‘Magnificent Seven’ remain in demand while investors broaden out their exposure into the smaller, overlooked value stocks which make up the Russell – an unusual situation, which suggests that risk appetite and confidence in US equities remain at high levels.
Despite this, US stock index futures were a touch softer in early trade this morning, although they found a modest bid as the European session progressed.
Nvidia’s rally yesterday helped to lift the broader tech sector. Yet concerns remain over whether the ongoing AI-driven rally can continue powering US equities. The leading tech companies are investing hundreds of billions in generative AI, and some investors continue to question if this is money well spent.
Despite this, equities continue to grind higher with little indication that there’s anything on the horizon which could derail the current rally. Investors are looking ahead to Friday’s release of the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, which could offer clarity on the path of monetary policy.
Yet comments made after last week’s Federal Reserve monetary policy meeting suggest that the central bank is more concerned about potential weakness in the labour market, rather than inflation, which continues to remain stubbornly high.
At the same time, there is a degree of uncertainty politically, as Congress is still unable to secure an agreement to fund the government. If an agreement can’t be reached, then the result will be a government shutdown.
Historically, shutdowns have had a limited impact on markets. But this time could be different, so investors are hoping for a resolution before the month-end. Federal Reserve Chair Jerome Powell is scheduled to speak today. This follows on from the new Fed governor, and Trump appointee, Stephen Miran, who yesterday called for deeper rate cuts.
In other political news, or rather the lack of it, President Trump has still not commented on last week’s Fed rate cut (other than a single nonsensical post on social media).
Nvidia’s investment in OpenAI also spurred rallies in energy names tied to electricity demand. Constellation Energy jumped 4.9%, Vistra Energy rose 3.1%, Oklo advanced 3.8% and Talen Energy climbed 1.5%, with several reaching intraday highs. However, most pulled back after hours.