On Tuesday, stocks hit fresh records as investors eagerly stepped further into the artificial intelligence (AI) trade, just one day ahead of the Federal Reserve's highly anticipated interest rate decision. The S&P 500 climbed by 0.23% to close at 6,890.89, notably surpassing the 6,900 threshold for the first time on an intraday basis earlier in the session. Meanwhile, the Nasdaq Composite advanced 0.80%, finishing at 23,827.49, and the Dow Jones Industrial Average gained 161.78 points, or 0.34%, concluding the day at 47,706.37. In addition to these impressive closing figures, both the tech-heavy Nasdaq and the 30-stock Dow achieved new all-time intraday highs alongside the broad market S&P 500.
The market's gains were significantly driven by Nvidia, which surged approximately 5% and reached a new high. During its GTC conference on Tuesday, Nvidia made several key announcements, including a substantial partnership with Finnish company Nokia. Nvidia is set to acquire a $1 billion stake in Nokia, which plans to use the funds to partially support its AI initiatives. Other companies related to AI, such as Broadcom, also experienced a boost in their stock prices.
Heading into its earnings results on Wednesday, Microsoft saw its stock rise around 2%. Both Microsoft and Apple achieved a significant milestone by crossing the $4 trillion mark in market value during Tuesday's trading session. In a noteworthy development, OpenAI announced the completion of its recapitalization, a strategic move that positions Microsoft for a lucrative windfall, given its approximate 27% stake in the for-profit arm, OpenAI Group PBC.
This week, several prominent companies, part of the so-called Magnificent Seven including Alphabet, Amazon, and Meta Platforms, are set to report their earnings. Collectively, these five companies represent about one-quarter of the S&P 500's total value. According to Mike Dickson of Horizon Investments, the earnings season has kicked off on a strong note, with about one-third of S&P 500 companies already reporting. Remarkably, 83% of these companies have surpassed earnings expectations, as per FactSet data.
As the market looks forward, the Federal Reserve is expected to announce a second cut to its benchmark rate for 2025 on Wednesday. Investors are also anticipating a signal from Fed Chair Jerome Powell regarding a potential further cut at the central bank's final meeting of the year in December.
During Monday's trading session, investors reacted positively to easing tensions between the U.S. and China, particularly ahead of a crucial meeting between President Donald Trump and Chinese President Xi Jinping scheduled for Thursday. Trump indicated that both nations were likely to finalize a trade deal, potentially addressing issues such as China’s restrictions on rare earth minerals, soybean purchases, and the future of TikTok.
According to a report from the Wall Street Journal, there are discussions about lowering tariffs on Chinese goods if Beijing takes measures to restrict the export of chemicals used to produce fentanyl. Dickson emphasized that the market is anticipating a conclusive outcome from this high-stakes meeting. "If we don't see some form of agreement that captures headlines, I think it will be perceived as a disappointment," he noted. "This doesn't mean that all issues will be resolved, but it indicates that there has been some definitive progress."
