Stocks Settle Mostly Higher as AI Frenzy Boosts Chipmakers

On Monday, the S&P 500 Index ($SPX) (SPY) ended the day up +0.36%, while the Dow Jones Industrials Index ($DOWI) (DIA) saw a slight decline of -0.14%. Meanwhile, the Nasdaq 100 Index ($IUXX) (QQQ) climbed +0.78%. December E-mini S&P futures (ESZ25) increased by +0.37%, and December E-mini Nasdaq futures (NQZ25) gained +0.75%.

Overall, stock indexes closed higher yesterday, with the Nasdaq 100 reaching a new all-time high. Advanced Micro Devices experienced a significant surge of over 23% following its monumental partnership with OpenAI, worth several billion dollars, which invigorated the AI sector. There is growing optimism that advancements in artificial intelligence and associated investments will boost corporate profitability, fueling bullish sentiment in the market. Additionally, expectations of a resilient US economy and potential further easing from the Federal Reserve support stock prices.

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Increased bond yields on Monday tempered stock gains, with the yield on the 10-year T-note rising +4 basis points to 4.16%. Additionally, shares in Verizon Communications dropped by more than -5%, adding pressure on the Dow. The prolongation of the US government shutdown is now in its second week, affecting investor sentiment and postponing critical economic data releases.

The ongoing government shutdown has resulted in delays for vital reports, including last week’s monthly payroll data. A continued shutdown could also affect the publication of the inflation statistics set for October 15. The White House has cautioned that an extended shutdown could lead to significant layoffs in governmental sectors outside of President Trump’s strategic priorities. According to Bloomberg Economics, approximately 640,000 federal employees could be furloughed, potentially increasing jobless claims and raising the unemployment rate to 4.7%.

The current US government impasse, combined with expectations for more Fed support and rising political uncertainty in France and Japan, is driving investors toward safe-haven assets, notably gold and Bitcoin. French Prime Minister Lecornu’s resignation follows President Macron’s new cabinet announcement, intensifying uncertainty in the Eurozone’s second-largest economy. In Japan, Sanae Takaichi, a proponent of loose fiscal and monetary policies, has emerged victorious in the LDP party election, positioning her as a potential future prime minister. Consequently, both gold and Bitcoin surged to new all-time highs on Monday, invigorating the so-called “debasement trade” as investors distance themselves from fiat currencies.