US: S&P 500, Nasdaq end higher as tech strength outweighs Fed concerns

[NEW YORK]Technology shares boosted US stocks to a higher close on Wednesday (Oct 8) as investors, lacking economic data during the government shutdown, looked to minutes from the US Federal Reserve’s most recent policy meeting for clues to the outlook for interest rates.

The tech-laden Nasdaq enjoyed the biggest percentage gain, boosted by the artificial intelligence (AI)-related megacaps that have led market gains so far this year.

The S&P 500 and the Nasdaq notched all-time closing highs, while the Dow ended essentially flat.

Chip stocks were clear outperformers, while energy, consumer staples and homebuilders were the laggards, as a report from the Mortgage Bankers Association showed home loan demand dipped 4.7 per cent last week despite easing interest rates.

“The theme continues to be aggressive growth, with a constant supply of deal announcements, one after the other, that are related to the AI space,” said Bill Merz, head of Capital Market Research at US Bank Wealth Management, Minneapolis.

“Anything attached to AI is garnering a significant amount of attention.”

Amid continuing euphoria surrounding AI, mounting US and geopolitical uncertainty has pushed gold prices above the US$4,000-per-ounce threshold as investors flock to the safe-haven metal as a hedge against growing risks.

“We have seen in the last few years that stocks and safe havens can work in conjunction with each other,” Merz added. “A part of that comes from this dual reality that … fundamentals, for now, are supporting higher than normal valuation, and simultaneously, deficit spending has to be financed by additional debt.”

The US government shutdown entered its eighth day, and a congressional stalemate appeared to suggest market participants will lack official economic indicators for the immediate future, leaving markets with little to go on until the third-quarter earnings season kicks off next week.

In the absence of data, investors looked to the third-quarter earnings season to get underway next week and the minutes from the September meeting of the Federal Open Markets Committee (FOMC) for clues as to the central bank’s intentions regarding interest rate cuts.

Those minutes showed a divided committee, with policymakers concerned about rising labour market risks but still wary of inflation. And while “most judged that it likely would be appropriate to ease policy further over the remainder of this year”, the timing and pace of further moves remained an open question.

“The topical discussion is about the extent of Fed cuts and how restrictive or not policy is,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina. “More broadly, the Fed is definitely not in a great position without public sector economic data as (the shutdown) continues to drag on, which really just makes policymakers’ already challenging job even tougher.”

Financial markets are currently pricing in a fairly certain 92.5 per cent likelihood that the Fed will lower the Fed funds target rate by 25 basis points at the conclusion of this month’s policy meeting, which is set to occur on Oct 29.

The Dow Jones Industrial Average fell 1.20 points, or 0 per cent, to 46,601.78, the S&P 500 gained 39.13 points, or 0.58 per cent, to 6,753.72, and the Nasdaq Composite gained 255.01 points, or 1.12 per cent, to 23,043.38.

Among the 11 major sectors of the S&P 500, tech shares led the gainers, while energy stocks had the steepest percentage loss. Datadog rose 6.2 per cent after Bernstein raised its price target on the cloud security firm, while Intercontinental Exchange ICE.N fell 2.2 per cent after Barclays cut its price target on the stock. Fair Isaac Corp fell 9.8 per cent after credit bureau Equifax said it plans to offer cheaper mortgage credit scores.

Surging gold prices helped US-listed shares of gold miners Newmont and Gold Fields gain 1.7 per cent and 3.7 per cent, respectively. Dell rose 9.1 per cent after multiple brokerages raised their price targets for the stock. Freeport-McMoRan advanced 5.3 per cent in the wake of Citigroup’s upgrade to “buy” from “neutral”.

Joby Aviation declined 8.1 per cent after the electric air taxi maker on Tuesday priced a US$514 million share sale at a 10.9 per cent discount to its last closing price.

AMD jumped 11.4 per cent, extending its gains for the third day. The chipmaker’s shares have surged over 43 per cent this week.

Advancing issues outnumbered decliners by a 1.74-to-1 ratio on the NYSE. There were 469 new highs and 70 new lows on the NYSE.

On the Nasdaq, 3,007 stocks rose and 1,659 fell as advancing issues outnumbered decliners by a 1.81-to-1 ratio.

The S&P 500 posted 35 new 52-week highs and six new lows while the Nasdaq Composite recorded 129 new highs and 62 new lows.

Volume on US exchanges was 20.7 billion shares, compared with the 19.63 billion average for the full session over the last 20 trading days. REUTERS