S&P 500 and Nasdaq reach historic heights as artificial intelligence trade re-ignites

Major US stock indexes advanced as tech giants paced a broader market rally, sending the S&P 500 and Nasdaq Composite to fresh closing records. The upward momentum was fueled by investor optimism surrounding artificial intelligence hardware leaders and upwardly revised corporate earnings expectations for the upcoming season.

The S&P 500 rose about 0.6% to a record close at 7,819, and the Nasdaq notched a second straight record near 27,599. The Dow added roughly 250 points as AI-linked shares led the gains.

Fixed-income pressure on equities relaxed slightly as the benchmark 10-year Treasury yield pulled back from near its multi-decade high above 5.3%. The 10-year yield fell to about 5.27% after touching a level not seen since 2002, which helped equities.

Economic data revealed the US domestic trade deficit expanded to $105.6 billion in August, exceeding consensus forecasts. Driven by a surge in record import levels, the gap reflects the widest imbalance observed since early 2025.

Crude oil rebounded as a Gulf of Mexico storm threatening US output and refineries, together with Houthi attacks on Saudi airports, outweighed higher Middle East exports and the G7’s 100-million-barrel reserve release.

The RBI’s Monetary Policy Committee announces its decision today  at 10:00 am, and the consensus is a 25 bp hike in the repo rate to 5.50% from 5.25%, the first increase since February 2023. Eight of 10 economists in a poll expect the hike, so it is a majority call rather than a unanimous one.

Rising inflation, surging oil prices and rupee pressure are behind the expectation. Markets will focus on the guidance rather than the decision itself, especially the vote split, any shift in stance away from neutral, and the revised inflation and growth projections.

The Indian rupee depreciated 13 paise to close at 96.42 against the US dollar, weighed down by continued dollar demand from FPIs and oil companies. Market participants will now focus on the RBI’s monetary-policy decision due today, along with the trajectory of foreign capital flows.

Nifty gained for the second consecutive session yesterday, rising 220 points to close at 22,776. Immediate resistance is placed at 22,875, followed by 23,080. On the downside, support has shifted higher to around 22,550.

Indian equities are poised for a subdued open, on rising energy costs and weaker cues from Asian markets.

Mr. Devarsh Vakil, Head of Prime Research at HDFC Securities