The S&P 500 touched its first all-time high since August on Tuesday, as expectations of bumper earnings among AI-related companies help stocks shrug off a brutal sell-off in government bonds. Wall Street’s blue-chip index rose 0.7 per cent, taking the index to a new record high after a downturn in September, when high oil prices and US Treasury yields at multi-decade highs were threatening to weigh on other assets. Investors and analysts said the rally is being powered by expectations of a stellar third-quarter earnings season for corporate America, driven by the trillions of dollars pouring into AI infrastructure. However, many sectors have been left behind, leaving the market increasingly reliant on a small group of tech stocks.
Arun Sai, senior multi-asset strategist at Pictet Asset Management, noted the market is in an earnings upswing. Technology stocks have rallied sharply since the S&P’s September low, hit nearly three weeks ago. Since then, chipmakers Advanced Micro Devices, Super Micro Computer and Intel have all gained 20 per cent or more, while Nvidia, the world’s biggest listed company, is up about 12 per cent, taking its market value to around $5.8tn. The Philadelphia Semiconductor index of US chip stocks is up almost 14 per cent since the start of September. Goldman Sachs forecasts AI infrastructure stocks will contribute more than half of the earnings-per-share growth of the entire S&P 500 in the third quarter, according to US equities strategist Ben Snider, who expects chipmakers Micron and Nvidia to account for more than a third of the entire earnings growth of the index.
However, the equal-weighted version of the index remains more than 5 per cent below its record high. Since the S&P 500’s low point in mid-September, only a third of its constituents have rallied, while the other two-thirds have fallen further, amid fears of further US interest rate rises. The utilities sub-index is down almost 10 per cent since August, and the consumer discretionary sub-index has fallen almost 5 per cent. Max Kettner, chief multi-asset strategist at HSBC, warned rate-sensitive stocks have really suffered, with damage under the hood. Marija Veitmane, global head of equity strategy at State Street, expects companies with weaker fundamentals to crack under higher interest rates.
Source: Financial Times Markets · Summarized by HeadlinesBriefing