S&P 500 ends near record high as AI optimism lifts chipmakers

Gains were down until about 1 pm when suddenly all three indexes soared, the S&P once again just a breath away from its January 2022 record close which, once reached, is expected to trigger another bull market. Today’s impetus was stellar performance from the chip companies which bolstered the chip index 3.4% and the overall tech index 2%.  All this week, healthy econ data kept the market down due to rate fears.  Today’s good news had the opposite effect. 

On the unemployment front, a decline in new claims showed a continuing strong labor market, taken as a sign of a resilient economy and soft landing which, in turn, created rate cut optimism again. There was also a boost from Atlanta Fed Prez Bostic who today changed his tune and said he was now open to rate cuts coming sooner than anticipated. After odds of a March cut recently falling to 54% (vs 80% a month ago), today those odds were primed a little to 56%.  Volume was heavy at 11.8 billion. 

S&P 500 ends near record high as AI optimism lifts chipmakers

By Noel Randewich and Ankika Biswas

Thu January 18, 2024 4:39 PM

DJ: 37,266.67  -94.45         NAS: 14,855.62  -88.72         S&P: 4,739.21  -26.77      1/17

DJ: 37,468.61  +201.94      NAS: 15,055.65  +200.03      S&P: 4,780.94  +41.73     1/18

Jan 18 (Reuters) - U.S. stocks ended sharply up on Thursday, with the S&P 500 approaching record highs as AI optimism drove gains in Nvidia and other chipmakers.  U.S.-listed shares of Taiwan Semiconductor Manufacturing (TSMC) soared nearly 10% after the world's largest contract semiconductor maker projected 2024 revenue growth of more than 20% on booming demand for high-end chips used in artificial-intelligence applications. 

Heavyweight chipmaker Nvidia (NVDA.O), opens new tab rose 1.9% to a record high, and it was the most-traded company on Wall Street, with almost $28 billion worth of shares exchanged. Rival Advanced Micro Devices (AMD.O), opens new tab rose 1.6% and also notched a record high.  Broadcom (AVGO.O), opens new tab, Qualcomm (QCOM.O), opens new tab and Marvell Technology (MRVL.O), opens new tab gained more than 3% each. The Philadelphia SE semiconductor index (.SOX), opens new tab rallied 3.4% and approached its December 2023 record high.  "AI has caused this industry to have a 'rip your face off' rally, and I don't think it's stopping anytime soon," said Jake Dollarhide, CEO of Longbow Asset Management.

Apple (AAPL.O), opens new tab jumped 3.3% after BofA Global Research upgraded the iPhone maker's stock to "buy" from "neutral." That helped the S&P 500 information technology index (.SPLRCT), opens new tab rise 2% and hit a record high.

The S&P 500 climbed 0.88% to end the session at 4,780.94 points. The benchmark is down just 0.3% from its record-high close in January 2022.  The Nasdaq gained 200.03 to 15,055.65 points, while the Dow Jones Industrial Average rose 201.94 to 37,468.61 points.

Data showed the number of Americans filing new claims for unemployment benefits fell last week to a late-2022 low, suggesting solid job growth in January.  Wall Street has wavered in recent sessions as investors became less sure the Federal Reserve will begin cutting interest rates in March.  The S&P 500 lost ground on Tuesday and Wednesday following strong December retail sales data and after policymakers talked down expectations for an early start to rate cuts.  Traders now see a 56% chance for a 25-basis-point rate cut in March, compared with a chance above 80% a month ago, according to the CME Group's FedWatch Tool.  Interest rate-sensitive sectors dipped, with the S&P 500 real estate index (.SPLRCR), opens new tab down 0.6% and utilities index (.SPLRCU), opens new tab losing 1.05%.  Atlanta Federal Reserve President Raphael Bostic said he was open to reducing rates sooner than he had anticipated if there is "convincing" evidence in coming months that inflation is falling faster than he expected. Bostic had previously said he expected it would be appropriate to cut rates in the second half of 2024.

Humana (HUM.N), opens new tab dropped 8% after the health insurer forecast fourth-quarter medical costs to be higher than previously expected. Peer UnitedHealth (UNH.N), opens new tab fell 1.6%.  KeyCorp (KEY.N), opens new tab dropped 4.6% after the lender posted a decline in fourth-quarter profit, while Birkenstock (BIRK.N), opens new tab sank about 8% after missing quarterly profit expectations.  Spirit Airlines (SAVE.N), opens new tab ended down more than 7% after news it is looking at options to refinance its debt and is not considering restructuring.

Advancing issues outnumbered falling ones within the S&P 500 (.AD.SPX), opens new tab by a two-to-one ratio.  The S&P 500 posted 30 new highs and seven new lows; the Nasdaq recorded 56 new highs and 180 new lows.

Volume on U.S. exchanges was relatively heavy, with 11.8 billion shares traded, compared with an average of 11.5 billion shares over the previous 20 sessions.