US equity indexes rose on Wednesday as SpaceX (SPCX) reported a return to profitability and Super Micro Computer (SMCI) exceeded revenue expectations, a combination that reinvigorated the artificial intelligence trade. The Nasdaq Composite advanced 1.1% to close at 26,702.86, while the S&P 500 climbed 0.6% to 7,757.17 and the Dow Jones Industrial Average gained 0.7% to 52,856.09. The rally was driven by strong performance in the technology sector, which accounted for six of the top 10 stocks with a market capitalization exceeding $200 billion, according to data compiled by Finviz.
SpaceX led the list of mega-cap gainers, surging 7.8% to top Nasdaq gainers. The company announced late Tuesday that it swung into the black in the third quarter, a result attributed to strong revenue growth in its artificial intelligence and connectivity divisions. Additionally, Elon Musk, who leads both SpaceX and Tesla, stated that the two companies have formed special committees to evaluate a potential merger. Saxo Bank noted in a Wednesday report that such a merger could facilitate technology sharing and reduce overlapping costs, with the combined market value expected to be approximately $3.5 trillion.
Super Micro Computer shares jumped 9.5%, placing the stock among the top performers on both the S&P 500 and the Nasdaq. The company reported preliminary fiscal first-quarter revenue and margin results late Tuesday that surpassed market expectations. Matt Bryson and other analysts at Wedbush Securities described the results as a "strong beat" and a positive indicator for third-quarter AI demand.
Not all technology stocks followed the upward trend. Netflix (NFLX) fell 5.3%, among the worst performers on major indices, after its fourth-quarter outlook disappointed investors despite better-than-expected second-quarter earnings. The iShares PHLX Semiconductor Exchange Traded Fund, which manages about $48.43 billion in assets, jumped 2.1% as investors re-entered the AI sector following the previous week's sell-off.
In economic data, mortgage applications dropped 5.3% in the week ended October 16, according to the Mortgage Bankers Association. This decline was driven by lower refinancing activity and new home applications, occurring despite a two-month low in 30-year fixed mortgage rates. This followed a 2.7% decrease in overall activity in the prior week ending October 9.
US Treasury markets showed mixed signals. The 20-year auction recorded a high yield of 5.469%, up from 5.420% in the previous sale, but the bid-to-cover ratio improved to 2.73 from 2.57, suggesting increased demand for government debt. The 10-year yield remained little changed at 5.12%, while the 30-year rate fell 1.5 basis points to 5.41%. Conversely, the two-year rate rose two basis points to 4.81%.
Energy markets reflected shifting inventory dynamics. US commercial crude oil stocks fell by 3.1 million barrels in the week ended October 16, significantly exceeding the 340,000-barrel decline expected in a Bloomberg-compiled survey after an 8.6-million-barrel drop in the previous week. Front-month West Texas Intermediate crude oil slipped 0.4% to $97.47 per barrel, while Brent crude climbed 0.6% to $109.39 per barrel. Precious metals also edged higher, with gold futures rising 0.4% to $4,158.9 and silver futures gaining 0.2% to $58.11.