S&P 500 and Nasdaq Hit Record Highs as AI Chip Rally Outweighs Bond, Energy Risks

CNBC reported that the S&P 500 touched an all-time intraday high of 7,844.52, surpassing its Aug. 13 intraday peak of 7,830, and closed above 7,800 for the first time. The record came after months of oil shocks, rising borrowing costs and the possible start of a Federal Reserve rate-hiking cycle, according to CNBC. The 10-year Treasury yield had risen to a fresh 2022 high around 5.31% a day earlier.

The Guardian reported that investors were optimistic after recent developments from chipmakers including Marvell Technology, Advanced Micro Devices and Broadcom showed growth in markets for chips used to power AI. It also reported that Wall Street had grown more optimistic the Fed would leave interest rates unchanged at its next board meeting in October, after September job figures showed underwhelming labor-market growth and multiple Fed officials said the next interest rate increase could probably wait. CNBC, by contrast, reported that the Fed raised its benchmark rate in mid-September for the first time in more than three years and indicated more increases were to come. The central bank was scheduled to release minutes from its September meeting on Wednesday.

Bond and energy markets remained sources of strain. The Guardian reported the yield on 10-year U.S. Treasury bonds reached 5.349% on Monday, the highest since April 2022, before dipping on Tuesday. For American consumers, higher energy prices continued to be a major pain point: gas prices had dipped over the last week but were still about $1.20 a gallon higher on average than a year earlier, while diesel had fallen from a record high but remained more than 40% higher than a year earlier. CNBC reported oil crossed $100 a barrel in early March for the first time since 2022 as the Iran conflict disrupted energy supplies moving through the Strait of Hormuz, then fell below $70 before rising back above $100 in early September.

CNBC reported that the latest record run, unlike prior records this year, was narrowly led by a few stocks tied to AI hype and considered less exposed to adverse macroeconomic headwinds. The so-called Magnificent 7—Nvidia, Alphabet, Amazon, Apple, Meta, Microsoft and Tesla—made up more than 34% of the market capitalization of the S&P 500. JJ Kinahan, Cboe Global Markets senior vice president of retail and alternative investments, said: “When you consider that much girth among a small handful of stocks, it's apparent how much these stocks' daily movements dictate the direction of the S&P 500 and the Nasdaq, both of which are in record territory again today.” He also said that when traders look past recent negative noise, the U.S. stock market appears the best place to invest compared with other locations, and that the mostly positive risk-reward ratio seen over multiple decades is hard to argue against.

Tech companies have been investing heavily in data centers and computing infrastructure, increasing demand for chips and equipment, CNBC reported. Amazon said earlier this year it expected about $200 billion in capital expenditures across its businesses in 2026, citing opportunities including AI, chips and robotics. Investor appetite for ambitious technology bets was also evident in June when SpaceX raised $75 billion in the largest IPO ever and began trading on June 12, according to CNBC.

Shawn Snyder, economic strategist at Potomac Fund Management, told CNBC: “At the end of the day, oil and bond yields can be correlated, but so is the stock market and profits. And if the profits are there, which they have been, the stock market is going to be resilient, even if the economy is a bit more mixed.” Snyder cautioned that the weakening market breadth may last longer if inflation shows no signs of easing or if there is no clear signal that the Federal Reserve is achieving its mandate. The market “can look relatively calm, but there are still things going on underneath the surface that may not be so calm,” he said.

The economy is expected to be a top issue in the upcoming midterm elections, with many voters expressing frustration over high prices, The Guardian reported. Donald Trump, who has been stumping for Republican candidates across the country, has tried to paint a different picture for voters. At a rally in Nebraska on Monday night, Trump said that “our nation is doing better now than it's ever done” and that gas prices would fall below $1.85 a gallon “in no time.”