US stock markets experienced a robust rally, with the tech-heavy Nasdaq Composite hitting a record high, driven by a resurgence of investor confidence in the AI sector. Concerns about "extinction risk" in AI development receded, leading traders to increase bets on a prolonged AI boom. Chipmakers, seen as major beneficiaries of data-center expansion, performed exceptionally well. Advanced Micro Devices (AMD) surged 9.9% to $615.52, achieving a market capitalization of over $1 trillion for the first time, while Intel rose 13% and Micron gained 2.3%. Meta Platforms also saw a 6.7% increase, reaching a seven-month high after Wells Fargo upgraded its price target, citing strong performance from its Muse AI agent.
The overall market performance was strong, with the Dow Jones Industrial Average rising 366.19 points, or 0.71%, to 52048.83. The S&P 500 gained 114.20 points, or 1.49%, to 7764.70, and the Nasdaq Composite added 599.55 points, or 2.26%, closing at a record 27122.09. This marks the Nasdaq's first record close since June 2, according to Dow Jones Market Data. Communication Services, Technology, and Consumer Discretionary sectors were among the top performers, while Energy, Utilities, and Consumer Staples lagged.
A significant factor contributing to the market's rally was a sharp decline in oil prices, with Brent crude falling below $98 a barrel. Oil futures dropped $4.52, or 4.5%, to $95.78 a barrel, and WTI settled $3.71 lower at $92.37/bbl. This decline was primarily fueled by hopes of a diplomatic breakthrough between the US and Iran at the United Nations General Assembly, as President Donald Trump indicated an openness to meeting Iranian officials. This potential for de-escalation in the Middle East, particularly regarding the US refraining from immediate retaliation for Houthi attacks on Saudi infrastructure, eased market anxieties. J.D. Joyce, president of Joyce Wealth Management, noted that any positive indication in the fluid situation was well received by the market.
Treasury yields saw mixed movements but generally retreated from multiyear peaks, offering some relief to equities. The yield on the two-year Treasury rose 0.009 percentage point to 4.751%, its highest close since July 1, 2024. However, the yield on the 10-year Treasury note declined 0.033 percentage point to 4.962%, and the yield on the 30-year bond fell 0.031 percentage point to 5.296%. Despite the positive market sentiment, concerns about inflation and the Federal Reserve's policy response kept Treasury yields near elevated levels, with Chicago Fed President Austan Goolsbee emphasizing the need for higher interest rates due to broad-based inflation pressures. Investors are also watching for developments from a Trump/Xi meeting regarding trade, with Treasury Secretary Bessent suggesting tariff reductions on certain goods.
