U.S. Stocks Rise Near Record Highs on Buyout Deals and AI Boost

U.S. stocks edged higher on Monday, pushing the S&P 500 close to its all-time high after two major buyout deals boosted investor confidence. The S&P 500 rose 0.7%, pulling within 0.3% of its summer record, while the Nasdaq composite set a new high with a 1.1% gain. The Dow Jones Industrial Average added 90 points, or 0.2%. The rally was led by PTC, which surged 33.5% after Schneider Electric agreed to acquire it for $22.6 billion, or $205 per share. RXO also jumped 22.5% following news that C.H. Robinson Worldwide would buy the truck brokerage business for $30.25 per share.

Both deals highlighted the growing influence of artificial-intelligence technology, with Nvidia contributing a 2.1% gain to the S&P 500 and Broadcom climbing 2.1%. Trading remained relatively quiet as investors awaited the start of the latest earnings reporting season, with analysts expecting nearly 30% profit growth for S&P 500 companies from a year earlier. Such strong growth has helped stocks rally near record levels despite ongoing economic concerns.

The oil market saw volatility due to uncertainty surrounding the war with Iran, with Brent crude prices settling at $100.32 after fluctuating between $100 and $103. Higher oil prices have pushed up bond market yields, with the 10-year U.S. Treasury yield rising to 5.31%. High yields can slow economic growth by increasing borrowing costs and making investors hesitant to pay high prices for stocks. Another factor driving yields is the strength of the U.S. economy, fueled by business spending on AI data centers and consumer spending despite high inflation.

A report on Monday provided a mixed update on the U.S. economy, showing that service sector activity grew for the 27th straight month but at a slower pace than expected. The report also indicated faster growth in the prices of materials and services, a potential warning sign for inflation. Wall Street expects the Federal Reserve to raise its main interest rate at least once by the end of the year to curb inflation. Meanwhile, international markets saw France's CAC 40 fall 0.8% due to concerns over government debt, while Japan's Nikkei 225 jumped 2.4% on strength in technology stocks.