The S&P 500 and Nasdaq closed at record highs on Tuesday, driven by a rally in AI chipmakers and a decline in US treasury yields. The S&P 500 rose 0.58% to surpass 7,800 for the first time in its history, while the tech-heavy Nasdaq climbed 0.45%. The Dow Jones Industrial Average, which remains slightly below its August peak, gained 0.49%.
Market optimism centered on recent developments from Marvell Technology, Advanced Micro Devices, and Broadcom, which indicated growth in the market for chips used to power AI. This confidence in technology stocks persisted despite broader signs of instability in the US economy and global politics.
Investors also grew more optimistic that the US Federal Reserve will leave interest rates unchanged at its next board meeting in October. September job figures showed underwhelming labor market growth, leading multiple Fed officials to state that the next interest rate increase can probably wait.
The stock market's resilience has occurred alongside turmoil in the US bond market, typically considered a safe investment vehicle. Concerns over high inflation and interest rates pushed bond yields to recent highs in recent weeks. On Monday, the yield for 10-year US treasury bonds reached 5.349%, the highest level since April 2022, before dipping back down on Tuesday.
For American consumers, high energy prices remain a significant issue. Although gas prices have decreased over the last week, they remain approximately $1.20 per gallon higher than a year ago. Diesel prices, used to fuel trucks, buses, and trains, have also fallen from record highs but are still over 40% higher than the previous year.
The economy is expected to be a top issue in upcoming midterm elections, with many voters expressing frustration over high prices. Donald Trump, who has been campaigning for Republican candidates across the country, has sought to present a different narrative to voters. At a rally in Nebraska on Monday night, Trump stated that "our nation is doing better now than it's ever done" and claimed gas prices would fall below $1.85 a gallon "in no time".