Stock Market Hits New Records Amid AI Hype and Anticipation of Fed Rate Decision
Key Highlights in the Stock Market
The stock market experienced a notable surge on Tuesday, reaching unprecedented heights as investors flocked to the booming artificial intelligence sector. With the Federal Reserve poised to announce its interest rate decision, the excitement in the markets was palpable.
Continued Upward Trend for Major Indices
The S&P 500 Index saw an increase of 0.23%, closing at 6,890.89, after surpassing the 6,900 mark during intraday trading for the first time. Meanwhile, the Nasdaq Composite surged by 0.80%, finishing at 23,827.49, and the Dow Jones Industrial Average added 161.78 points (0.34%) to settle at 47,706.37. Notably, both the Nasdaq and Dow attained all-time intraday highs, alongside the broad market S&P 500.
Nvidia Drives Market Momentum
Nvidia, a key player in the AI chip market, led the charge with a remarkable climb of approximately 5%, marking a new record for the company. At its GTC conference, Nvidia announced a significant partnership with Finnish firm Nokia, in which it will invest $1 billion to support Nokia’s AI initiatives. This news positively impacted other AI-centric companies, including Broadcom, which also saw gains.
Outlook for Major Tech Firms
As investors eagerly awaited corporate earnings results, Microsoft’s stock rose about 2% ahead of its earnings announcement scheduled for Wednesday’s close. Microsoft and Apple both crossed the $4 trillion valuation mark during Tuesday’s trading session. In a significant move, OpenAI disclosed its recapitalization, which benefits Microsoft as it holds roughly 27% of the for-profit arm, OpenAI Group PBC.
The “Magnificent Seven” Earnings Reports
Several influential tech firms—often referred to as the “Magnificent Seven,” including Alphabet, Amazon, and Meta Platforms—are set to report earnings this week. Collectively, these five companies account for about 25% of the S&P 500’s total market value. The earnings season has kicked off to an impressive start, with around one-third of S&P 500 companies reporting so far, and 83% of them exceeding earnings expectations, according to FactSet data.
Mike Dickson of Horizon Investments remarked on the current market, stating, “Valuations are relatively elevated historically, and the market must now rely on strong earnings to continue this trend.” He added, “We have indeed witnessed strong performance so far.”
Federal Reserve’s Interest Rate Decision
The Federal Reserve is anticipated to lower its benchmark rate for the second time in 2025 on Wednesday. Investors are also hopeful that Fed Chair Jerome Powell will indicate another potential rate cut at the final meeting of the year in December.
U.S.-China Relations Impact Market Sentiment
In addition to the Fed’s impending decision, Monday’s trading session was buoyed by easing tensions between the U.S. and China. Ahead of a crucial meeting between President Donald Trump and Chinese President Xi Jinping on Thursday, Trump expressed optimism that both nations would reach a trade deal. Key topics include China’s restrictions on rare earth minerals, soybean purchases, and the ongoing TikTok negotiations.
Dickson noted, “Investors are looking for concrete outcomes from this meeting. A lack of a substantial agreement could disappoint the market, even if it doesn’t solve all issues.”
Unprecedented Market Milestones
On a record-setting note, the S&P 500 recorded its first close above 6,800, with the Nasdaq and Dow also achieving record highs. The Russell 2000 small-cap index likewise reached a new all-time high, solidifying a week of remarkable performances across all major benchmarks.
This surge in stock market indices fueled by AI advancements and an optimistic earnings season highlights a crucial moment for investors aiming to navigate through a complex financial landscape. As all eyes turn toward the Fed’s decision and upcoming earnings reports, market participants remain cautiously optimistic.
