AI gets its groove back: Chips lead rally as Nasdaq claims all-time closing high
SPY•Wall Street rallies as chips lift Nasdaq to record close
Wall Street rallied on Monday, pushing the Nasdaq .IXIC to a record closing high as oil dropped, Treasury yields eased, and investors rediscovered their briefly misplaced fervor for all things AI-related.
A 4.3% surge in the Philadelphia SE Semiconductor Index .SOX provided the Nasdaq's muscle, boosting the tech-heavy index by 2.3%, its largest daily percentage gain since August 4.
The S&P 500 .SPX jumped 1.5%, while the Dow's .DJI gains were a bit more modest.
Markets have reconciled themselves to the reality that they are now in a monetary policy tightening phase, with central banks around the globe hiking interest rates to contend with Iran war-related price pressures.
They have, in fact, priced in a 55.4% probability of an October rate hike from Warsh & Co., up from 8.8% a month ago, per CME's FedWatch tool.
Based on this, last week's increase to the Fed funds target rate, the first hike in three years, may not be a one-and-done proposition.
St. Louis Fed President Alberto Musalem said as much on Monday when he told Reuters that more hikes are necessary to dampen strong demand and hot commodity prices, and added that it would be better for the central bank to act sooner rather than later.
The fact that front-month WTI and Brent crude futures settled down 4.5% and 3.4% on the day, amid hints of easing Middle East tensions, was icing on the cake. Equity investors were also pleased to see the benchmark Treasury yield slowly retreat from the 5% level.
