S&P 500 closes at 7,819 as AI chipmakers drive record high

The S&P 500 closed at a record 7,819 points on Tuesday, rising 0.58%, as shares of artificial intelligence companies jumped. The tech-heavy Nasdaq Composite gained 0.45% to 27,605 points and the Dow Jones Industrial Average climbed 0.49%, or 253 points, to 51,532 points. The S&P 500 topped 7,800 for the first time in its history, and the Nasdaq hit a record high for a third straight day.theguardian.com+1

The rally marks the S&P 500's first record close since mid-August and its first ever above 7,800 points. The index is up 14% this year and is on track for a fourth straight year of double-digit gains. The advance came even as the 10-year Treasury yield, which underpins borrowing costs from mortgages to corporate debt, remained near multi-year highs, and as investors weighed uncertainty about the war with Iran.

What drove the record close

Marvell Technology, a chip designer, lifted its revenue forecast for 2028 on strong demand for its data centre chips, and its shares rose 5.8%, their best day in a month. Advanced Micro Devices gained 2.8% after chief executive Lisa Su told reporters in Taipei that the company plans to ramp up its supply of semiconductor chips next year. Broadcom also added to the gains, according to coverage of the session.

The mechanism linking the two moves runs through energy prices and bond yields. Brent crude futures rose 0.7% to $US101.06 per barrel after Group of Seven countries agreed to release emergency diesel and crude stockpiles, easing supply worries. Lower oil prices reduce anxiety about energy-driven inflation, which pulls government borrowing costs down and lets stocks rise, said Oliver Pursche, senior vice president at Wealthspire Advisors in New York.

Long-dated US Treasury yields eased after touching fresh 24-year highs earlier in the week, in a sell-off running since late August over inflation and unsustainable debt concerns. The US 10-year yield fell 0.04 percentage points to 5.26%, while the 30-year yield dropped 0.03 percentage points to 5.63%. The 10-year yield had traded as high as 5.35% on Monday before pulling back on Tuesday.

Where the gains came from

Gains concentrated heavily in the largest companies by market value, because the S&P 500 and Nasdaq weight their biggest members most heavily. Nvidia, at almost $6 trillion in market value, accounts for more than 8% of the S&P 500 and is up almost 5% this month. Tech is the only sector that has posted gains over the past month; real estate, financials, materials and utilities have each dropped more than 4%.cryptobriefing.com

The narrowness of the advance is the main dispute about the rally's strength. An equal-weight version of the S&P 500, which gives each stock the same weight, is down almost 5% since its record high in mid-August. "The breadth of the rally has narrowed," Ulrike Hoffmann-Burchardi, global head of equities at UBS, wrote in a note, adding that concentration of gains reinforces the importance of managing risk through a broadly diversified portfolio.

Craig Johnson, chief market technician at Piper Sandler, wrote that "a narrow set of leaders is doing more work than the underlying market." The Dow remains down 5% since its last record high in early August, lagging the S&P 500 and Nasdaq. Investors are also watching whether higher bond yields could weigh on the rally, with the 10-year yield still at its highest level since 2007.

What could test the rally

Beyond equities, Wall Street has grown more optimistic that the US Federal Reserve will leave interest rates unchanged at its next board meeting in October. Job figures from September showed underwhelming growth in the labour market, and multiple Federal Reserve officials have said the next interest rate increase can probably wait. Bond markets also found relief after France's unpopular budget triggered a French debt sell-off.abc.net.au

For consumers, energy prices remain a pressure point. Gas prices have dipped over the last week but are still about $1.20 a gallon on average higher than a year ago, while diesel is still over 40% higher than a year ago despite falling from record highs. Brent crude at $US101.06 per barrel is lower than it has been in recent weeks, which has helped ease inflation fears.

The immediate test is third-quarter earnings season. Projections for the upcoming quarter call for corporate earnings growth of approximately 29.5% year over year, with AI investment driving much of that figure, leaving a high bar for AI-linked companies. Watch whether earnings from AI leaders meet those projections, whether Treasury yields keep easing or push higher again, and whether participation broadens beyond the megacap technology names.