Wall Street Sets New Records as Stocks Tick Higher
The US stock market has continued its upward trend, with most stocks experiencing a surge on Friday, leading to new records being set. The S&P 500 saw a minimal increase of less than 0.1%, marking its seventh winning week in the last nine, while the Dow Jones industrial average climbed 238 points, or 0.5%, adding to its all-time highs. The Nasdaq composite, however, slipped 0.3% from its own record after losing its early gain.
Typically, the first Friday of each month is dominated by the monthly jobs update released by the US government, which provides insights into the number of jobs created and destroyed, as well as the unemployment rate. This data is particularly crucial at present, given the market’s expectation that the job market is slowing down enough to prompt the Federal Reserve to continue cutting interest rates. However, the current US government shutdown has delayed the release of this data.
Impact of Government Shutdown on the Stock Market
Despite the delay in the release of crucial economic data, the US stock market has remained resilient, looking past the shutdown and its potential implications. Historical precedents suggest that past government shutdowns have had minimal impact on the economy and the stock market. This time around, despite President Trump’s threats of large-scale firings of federal workers, the market seems to be adopting a similar stance.
Instead, the focus has shifted to the excitement surrounding artificial intelligence (AI) and the massive spending underway in this sector. The industry received a significant boost after Japan’s Hitachi signed a memorandum of understanding with OpenAI, related to powering AI. This development follows an earlier set of announcements by OpenAI with South Korean companies, which led to a surge in stock prices. Hitachi’s stock jumped 10.3% in Tokyo, reflecting the growing interest in AI stocks.
Avoiding Potential Bubbles in AI Stocks
While AI stocks have become increasingly dominant, with substantial investments pouring into the industry, concerns are rising about the potential for a bubble that could eventually lead to disappointment for investors. Nvidia, often considered the poster child of the AI boom, experienced a dip of 0.7% after losing its early gain. Applied Materials also fell 2.7% after announcing that it would take a roughly $110-million hit to its revenue in the fourth quarter due to new Commerce Department rules expanding export restrictions to certain customers based in China.
However, gains in oil producers helped offset these losses, with Exxon Mobil climbing 1.8% and Diamondback Energy rising 3% as crude prices recovered some of their earlier losses. Entergy also saw a 1.9% increase after announcing that its Arkansas business would deliver power for Google’s planned $4-billion investment in the state, including a new data center.
The S&P 500 added 0.44 to 6,715.79 points, while the Dow Jones industrial average climbed 238.56 to 46,758.28, and the Nasdaq composite fell 63.54 to 22,780.51. In international markets, indexes were mixed across Europe and Asia, with Japan’s Nikkei 225 rising 1.9% thanks in part to Hitachi’s significant jump.
In the bond market, the yield on the 10-year Treasury rose to 4.12% from 4.10% late Thursday. Reports on activity for US businesses in the healthcare, real estate, and other services industries were mixed, with one from the Institute for Supply Management indicating stalling growth, while another from S&P Global suggested slow growth.
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