S&P 500 Hits Record High Fueled by AI and Tech Stocks

The S&P 500 reached a record high of 7,830 points on Tuesday, marking its first intraday record in nearly two months. The index needs a 0.3% gain to close at its first record high since August 13, which would be the 28th record high of the year. The rally is driven by renewed enthusiasm for artificial intelligence, with tech and AI stocks leading the charge. Other sectors, such as real estate, financials, materials, and utilities, have struggled due to higher borrowing costs.

The 10-year Treasury yield hit its highest level since 2002, influencing economic activity and mortgage rates. Tech is the only sector that has posted gains over the past month, while others have dropped more than 5%. A drop in oil prices and Treasury yields provided a boost to stocks across sectors on Tuesday. Brent crude fell 2% to $98 per barrel, offering some relief from recent highs.

Nvidia, with a market value of almost $6 trillion, accounts for more than 8% of the S&P 500 and has seen a 6% increase this month, significantly impacting the major indexes. However, Wall Street remains cautious about the rally's dependence on tech and the potential impact of higher bond yields. Ulrike Hoffmann-Burchardi, global head of equities at UBS, noted the narrowing breadth of the rally and emphasized the importance of a diversified equity portfolio.

Despite the choppy ride, the S&P 500 has rebounded, boosted by AI optimism, strong corporate earnings, and a resilient US economic backdrop. The index is up more than 14% this year and on track for its fourth-straight year of double-digit gains. Recent optimism was sparked by Meta's successful launch of its Muse personal assistant app, which reignited enthusiasm for consumer AI applications. While the S&P 500 and Nasdaq are at record highs, the Dow Jones Industrial Average is down roughly 5% from its early August record high.