Nasdaq Hits Record Close as Chipmakers and AI Stocks Fuel Market Gains
Market Performance and Key Drivers
By Karen Brettell
NEW YORK, Sept 21 (Reuters) - The Nasdaq hit a record closing high on Monday, lifted by gains in Advanced Micro Devices and other AI heavyweights, while falling oil prices and long-dated Treasury yields also boosted risk sentiment.
Chipmakers and AI Stocks Lead the Rally
Chip stocks rallied, with Intel and Arm Holdings surging over 12%, and the PHLX semiconductor index jumping 4.3%.
Advanced Micro Devices closed 10% higher to reach a market capitalization of $1 trillion for the first time.
Investors pointed to signs that suggest spending on AI is still expanding, despite recent safety warnings from leaders of AI giants a week ago that triggered a global tech selloff.
Major Indexes Hit New Highs
The Nasdaq Composite rose 2.26% and posted a record closing high for the first time since June 2, while the S&P 500 gained 1.49%, just shy of its record. The Dow Jones Industrial Average ended up 0.71%.
MSCI's All-World index rose 1.31%, while shares in Europe rallied 1.02%.
Investor Sentiment and Central Bank Policy
Risk appetite remains strong despite growing expectations of further global rate hikes.
“While synchronized rate hikes have raised concerns about risk assets, equities remain near record highs, supported by strong earnings growth,” said Seema Shah, chief global strategist at Principal Asset Management.
“Importantly, central banks are raising rates to address inflation rather than to slow economic activity, suggesting tightening will be gradual and limited. While higher rates may hinder further multiple expansion, they are unlikely to materially pressure earnings or derail the broader bull market,” Shah said.
Interest Rate Movements
Short-Dated Yields Rise
Interest-rate-sensitive two-year US Treasury yields rose 0.75 of a basis point to 4.751% and earlier reached 4.772%, the highest since July 2024. Benchmark 10-year yields fell 4.5 basis points to 4.951%.
Central banks in most major economies are expected to raise rates again this year. Hawkish guidance from the Federal Reserve last week has futures wagering on a 55% chance it will hike rates again in October, with 91% odds of a hike by year-end.
Concern about the impact of inflation, as well as over governments' long-term finances, hit French debt on Friday, sending its risk premium to the highest since the 2012 euro zone debt crisis.
But yields fell on Monday alongside the drop in oil, leaving German 10-year yields down 6 basis points at 3.462% and French 10-year yields 9 bps lower at 4.474%.
Commodities and Currency Markets
Oil Retreats, For Now
Oil futures prices eased even as Iran and the United States exchanged new threats and after the Houthis attacked Saudi Arabia's capital.
US crude fell 4.86% to $95.43 a barrel and Brent fell to $100.11 per barrel, down 3.62% on the day.
“Profit-taking after recent gains, together with hopes for constructive discussions at this week's UN General Assembly (UNGA) and the upcoming Trump-Xi meeting, helped improve market sentiment,” said ING commodities strategists Ewa Manthey and Warren Patterson in a note.
US President Donald Trump will attend the United Nations General Assembly this week, ahead of a meeting with Chinese President Xi Jinping on Thursday.
There were also reports that Saudi producers were aiming to quickly restart some flows through the country's main east-to-west pipeline after it was damaged in attacks last week, though details were lacking and analysts harboured doubts.
Data from analytics firm Kpler showed exports from Saudi Arabia had recovered to just over 4 million barrels per day so far in September after slumping to 2.4 million bpd in August, the lowest since at least 2013. [O/R]
Currency Market Movements
In foreign exchange, the dollar gained 0.35% against the yen to 157.42, with investors wary in case the Bank of Japan took advantage of the lack of liquidity during the country's three-day Silver Week holiday to step in to buy the currency.
The yen jumped on Friday after Japanese authorities conducted rate checks in the currency market, the Nikkei newspaper reported.
(Reporting by Karen Brettell in New York, Amanda Cooper in London, Noel Randewich in San Francisco and Johann M Cherian in Bengaluru; Editing by Nia Williams and Matthew Lewis)
