Wall Street indexes closed up on Monday with the Nasdaq leading gains as investors bought heavyweight technology stocks and shrugged off the uncertainty of a potential U.S. government shutdown and hawkish remarks from Federal Reserve officials. The TSX also rose, closing at its highest ever but just shy of the 30,000 mark, with tech and gold stocks on the move higher.
Technology provided the benchmark S&P 500’s biggest boost as investors bet on growth from artificial intelligence and expectations that the Fed will keep cutting interest rates as it grapples with persistent inflation concerns and labor market uncertainties.
A major focus for Wall Street this week is a standoff between Republicans and Democrats over funding that has raised the prospect of a government shutdown beginning Wednesday, the first day of the U.S. government’s new fiscal year. Even as the Labor Department prepared for a potential delay of its September jobs report in the event of a shutdown, this did not seem to be the key market driver, said Lindsey Bell, chief strategist at 248 Ventures in Charlotte, North Carolina.
“Investors are clinging to the positives,” Bell said, pointing to rate easing hopes and signs of economic resilience from recent releases including housing market and consumer spending data.
“The market is not going to shoot to the moon, because this is a risk. But investors can look through the potential for a shutdown, because if it does occur it will likely be resolved quickly and the market can resume focusing on the things that do matter, like earnings, monetary policy and AI investments.”
While shutdowns have not tended to impact corporate results historically, the imminent threat may have limited gains and kept trading volume light on Monday, according to Burns McKinney, portfolio manager and NFJ Investment Group in Dallas, Texas.
“The only reason it would truly move markets is if it affects the bottom line. Historically speaking, government shutdowns are brief and they don’t have an impact on profitability so investors tend to be forward-looking,” said McKinney.
“It’s just like smoke on a racetrack. They just keep the wheels straight, manage through the stress and move forward through the smoke.”
Investors were also monitoring Fed policymakers’ commentary for any signs of concern over the potential loss of economic visibility should a shutdown materialize. Cleveland Fed President Beth Hammack, among the most hawkish Fed officials and not a voter on policy this year, said on Monday the central bank needed to maintain restrictive monetary policy to cool inflation.
St. Louis Federal Reserve President Alberto Musalem, a voter on rates this year, said he was open to further interest rate cuts but that the Fed must be cautious and keep rates high enough to continue to lean against inflation, which remains roughly a percentage point above the central bank’s 2% target. Traders, however, are pricing in a roughly 89% chance of a 25-basis-point rate cut at the next Fed meeting, according to CME Group’s FedWatch tool.
The Dow Jones Industrial Average rose 68.78 points, or 0.15%, to 46,316.07, the S&P 500 gained 17.51 points, or 0.26%, to 6,661.21 and the Nasdaq Composite gained 107.09 points, or 0.48%, to 22,591.15.
The S&P/TSX Composite Index closed up 210.63 points, or 0.71%, at 29,971.91, surpassing the previous record high close on Sept. 22. Technology stocks gained 3.5%, while materials - which includes gold miners - rose 1.3% amid another record high in bullion. This was despite a decline of 4% for the shares of Barrick Mining. The company appointed veteran executive Mark Hill as interim president and CEO following the sudden resignation of Mark Bristow.
In the Canadian tech sector, e-commerce company Shopify Inc added 6.2%. OpenAI introduced a feature that would allow users to make purchases through ChatGPT, in partnership with Etsy and Shopify.
The health-care sector, which includes cannabis stocks, led gainers in Toronto, rallying 11.5%.
After U.S. President Donald Trump shared a video on Sunday promoting the health benefits of hemp-derived cannabidiol, cannabis-related companies spiked. U.S.-listed shares of Canopy Growth rallied 17% to $1.57 while Cronos Group rose almost 13% to $2.97 and Tilray Brands jumped 60.9% to $1.85.
Energy was the only one of 10 major sectors to end lower in Toronto, losing 1.5%. The price of oil settled down 3.45% at US$63.45 a barrel on expectations that OPEC+ will approve another increase to crude oil production at its meeting on Sunday.
Among the S&P 500’s 11 major industry sectors, nine advanced. With oil prices falling more than 3%, the energy sector was the biggest laggard, ending down 1.9%. Consumer discretionary was the biggest percentage gainer, adding 0.6%. But for index point boosts, technology was the clear leader with big pushes from AI chip leader Nvidia, up 2%, and Microsoft, which added 0.6%.
Electronic Arts shares rallied 4.5% after the game publisher agreed to be taken private in a $55 billion deal, fueling hopes for broader deal prospects, said Bell of 248 Ventures, who saw the transaction as “confirmation that the M&A market is open.”
Lam Research shares advanced 2% after Deutsche Bank upgraded the rating on the chip-making equipment firm to “buy” from “hold.”
AppLovin set a fresh record high before closing up 6.3% at $712.36, also providing one of the biggest lifts for the S&P 500. Morgan Stanley raised the target price on the stock to $750 from $480.
Advancing issues outnumbered decliners by a 1.38-to-1 ratio on the NYSE where there were 337 new highs and 80 new lows. The S&P 500 posted 38 new 52-week highs and six new lows while the Nasdaq Composite recorded 116 new highs and 74 new lows.
On the Nasdaq, 2,525 stocks rose and 2,118 fell as advancing issues outnumbered decliners by a 1.19-to-1 ratio. On U.S. exchanges about 17.91 billion shares changed hands compared with the 18.25 billion average from the last 20 sessions.
Reuters, Globes staff