US stock markets delivered strong performance on Monday as the Nasdaq Composite touched a new all-time high of 27,544.07 before closing at 27,477.31, up 1.05% or 286.45 points. According to Goodreturns, the Nasdaq emerged as the top performer of the day, driven by a strong buying trend in technology stocks as investors looked beyond elevated oil prices and multi-decadal high treasury yields. Technology heavyweights led the gains, with Nvidia and Tesla climbing over 2% each, while Microsoft surged 1.5%, Alphabet gained 1%, Meta jumped 2%, and Broadcom rallied over 2%. SpaceX skyrocketed by 8% after reports indicated that the Elon Musk-backed rocket maker has proposed to build natural gas pipeline in Florida, in order to support Starship launches from Cape Canaveral. The S&P 500 closed higher by 51.23 points or 0.66% to end at 7,773.95, while the Dow Jones ended at 51,267.90, higher by 90.94 points or 0.18%. Seven of the 11 S&P 500 sectors advanced, led by communication services and utilities, with the software stocks outperforming and pushing the S&P 500 software and services index 1.4% higher.
Following the weaker jobs report, traders priced in a 24% chance of a rate increase of at least a quarter-point at the Fed's late-October meeting, down from a 70% chance a week ago, according to CME FedWatch. As reported by The Economic Times, traders now see an 80% chance that the Federal Reserve will leave interest rates unchanged this month, although a December increase remains largely priced in. A string of recent data showing resilient economic activity and a slower-than-expected increase in prices, along with comments from two top policymakers cautioning against another rate increase, had already led investors to scale back expectations this week for an October rate hike. The probability had fallen to below 21%, from 64% a week earlier, as reported by The Associated Press. The jobs report is important for the Fed as it weighs a slowing labor market against inflation that remains above its target. US mortgage rates are climbing sharply, with the average rate on a 30-year mortgage rising to 7.60%, though the elevated yield environment has made stocks less attractive to investors.
PTC emerged as the S&P 500's biggest gainer, surging after France's Schneider Electric agreed to acquire the software company in a $22.6 billion all-cash deal. According to The Economic Times, RXO jumped after freight forwarding firm C.H. Robinson Worldwide agreed to buy the transportation broker in a stock-and-cash transaction for $5.8 billion, with C.H. Robinson shares falling. Cerebras Systems rose after OpenAI CEO Sam Altman said on social media the chip designer is a "close partner" and that the companies have "deep engagement pushing on the frontiers of speed". Strong expectations for corporate earnings are buoying US equities, with Goldman Sachs analysts expecting most companies to "once again surpass consensus earnings estimates this quarter," projecting 9% year-on-year earnings growth for the median S&P 500 company. "Many investors expect higher yields to derail the equity rally, but I think the market still has enough momentum to push through further increases in interest rates," said Peter Andersen, founder of Andersen Capital Management, as reported by Reuters.
Wall Street continues to find buyers even as the 10-year bond yield surged to as high as 5.33%, the highest level since March 2022, with the 30-year bond yield reaching 5.703% for the first time after May 2002. According to CNBC TV18, according to BMO Asset Management, yields on the 30-year note will reach 6% this month and that is "inevitable". According to BMO Asset Management, yields on the 30-year note will reach 6% this month and that is "inevitable". The last instance of the US 30-year yield reaching levels of 6% was back in 2000. Analysts at Principal Asset Management believe that strong earnings, consumer spending and sustained AI-related investments have all kept the market intact as the street absorbs rising rates, higher energy costs and renewed inflation concerns. While Morgan Stanley said that a drop in US stock valuations has left some areas looking attractive as earnings growth is showing few signs of warning, UBS said that equities have room to move higher over the next 6-12 months, but the path will be anything but smooth.
Crude oil prices continue to remain lower, providing some relief to sentiments on the Street. According to CNBC TV18, Brent Crude is on the verge of breaking below the $100 a barrel mark again after Gulf producers continued to move more oil through the Strait of Hormuz and war-damaged nations continued to rebuild capacity. Kuwait highlighted that it is now pumping oil at 75% of the pre-war capacity. Iranian Parliament Speaker Mohammad Bagher Qalibaf said on Sunday that the Strait of Hormuz would not be reopened until the United States fulfils seven conditions linked to the June interim agreement between Tehran and Washington. Qalibaf said Iran's position was "completely clear and firm" and that the strait would remain closed until the seven conditions under the Islamabad Memorandum of Understanding are met. Higher oil prices can put pressure on equity valuations by increasing input costs and reducing the relative attractiveness of risk assets.
Third-quarter earnings season kicks off next week with reports from large US banks, with analysts on average seeing S&P 500 earnings jumping over 30% year over year, thanks largely to AI-related stocks, according to LSEG data. According to The Economic Times, optimism about robust corporate earnings has helped US stocks outperform global rivals in the last six months, despite rising Treasury yields and higher oil prices related to the US war with Iran. Markets are now looking ahead to Wednesday's release of the Fed's September meeting minutes, with investors set to scrutinise the document for clues on the central bank's approach to inflation and interest rates. Markets currently see an approximately 82% probability that the Fed will leave rates unchanged at its next meeting, as per Trading Economics. Expectations of robust corporate earnings have helped US equities outperform global peers over the past six months despite geopolitical uncertainty and persistent inflation concerns.
