AI enthusiasm fuels rally as U.S. stocks hit new highs

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2nd March 2024 – (New York) U.S. equities marked a buoyant start to March, with major indices scaling new heights on Wednesday, buoyed largely by the burgeoning optimism surrounding advancements in artificial intelligence (AI).

The Dow Jones Industrial Average inched upwards by a modest 90.99 points, a gain of 0.23%, to close at 39,087.38. The broader S&P 500 index, meanwhile, bolstered its position with an uplift of 40.81 points, or 0.80%, to settle at a record 5,137.08—its fifteenth peak this year. The tech-heavy Nasdaq Composite outperformed, enjoying a 1.14% surge of 183.02 points to 16,274.94, its second consecutive record finish and a testament to the sector’s current robustness.

Sectoral performances within the S&P 500 were predominantly positive, with technology and energy sectors at the forefront, securing gains of 1.78% and 1.17% respectively. Conversely, utilities and financial sectors did not fare as well, with modest declines.

Despite the upbeat mood, the Institute for Supply Management’s manufacturing index presented a less rosy picture, contracting to 47.8% in February, its weakest in two months and signalling a protracted industrial slowdown not seen since the 2007-2009 recession.

In the bond market, U.S. Treasury yields took a dip following the mixed economic signals, with the benchmark yields touching a near three-week trough.

The stock market’s rally was further energised by AI, with Nvidia’s market valuation hitting a staggering 2 trillion dollars. In contrast, New York Community Bancorp witnessed a descent after alarming revelations on loan control deficiencies, a change in CEO, and a substantial 2.4 billion dollars charge.

Market analysts, such as Jamie Cox of Harris Financial Group, reflected on the tech sector’s meteoric rise, drawing parallels with the late 1990s and cautioning investors about potential market imbalances. “We’re seeing this big run-up in tech because there’s a massive emphasis on what it might be, there’s so much emphasis on AI and this big sort-of redux of the late 90s,” Cox observed. “People now just completely disregard the rest of the market. And that generally does not turn out well.”