
The major U.S. index futures are indicating a higher open on Thursday, suggesting that stocks are poised to continue the upward trend observed in recent sessions. Optimism regarding the artificial intelligence trade could bolster tech stocks, as evidenced by the 0.6 percent increase in the Nasdaq 100 futures. Nvidia, a prominent figure in the AI sector, is experiencing a 1.4 percent increase in pre-market trading. Meanwhile, other key players in the AI space, Advanced Micro Devices and Broadcom, are seeing notable gains of 3.2 percent and 3.5 percent, respectively. The resilience observed in AI stocks follows reports that OpenAI has finalized a deal that values the company at $500 billion.
The sale of approximately $6.6 billion in stock by current and former employees has propelled the owner of ChatGPT past Elon Musk’s SpaceX, establishing it as the most valuable privately-owned company in the world. “Reports suggest there was appetite for nearly twice as many as the actual number of shares on offer,” stated Russ Mould. The optimism surrounding AI might enable traders to persist in dismissing worries regarding the economic repercussions of the current U.S. government shutdown. The shutdown has led to the indefinite postponement of the reports on weekly jobless claims and factory orders that were set to be released this morning. Stocks faced pressure early in the session on Wednesday but managed to stage a notable turnaround as the trading day progressed. The major averages surged significantly from their session lows, moving into positive territory. The major averages relinquished some ground as the day drew to a close, yet they still concluded on a higher note. The Nasdaq increased by 95.15 points, or 0.4 percent, reaching 22,755.16. The S&P 500 gained 22.74 points, or 0.3 percent, to settle at 6,711.20, while the Dow edged up by 43.21 points, or 0.1 percent, to 46,441.10. In a remarkable turn of events, the major averages concluded the day on a positive note, marking the fourth consecutive session of gains, as both the Dow and the S&P 500 achieved new record closing highs.
The initial pullback occurred following the official shutdown of the U.S. government early this morning, as lawmakers were unable to pass a temporary spending bill. Democrats are insisting that any temporary funding bill must incorporate an extension of enhanced Obamacare tax credits, whereas Republicans contend that this matter should be addressed only after the funding bill is approved. Nonetheless, the initial selling pressure might have been counterbalanced by a sense of optimism regarding the future of interest rates after the publication of private sector employment data. Although the Labor Department’s highly anticipated monthly jobs report scheduled for release on Friday may face delays due to the shutdown, payroll processor ADP has published a report this morning indicating an unexpected decline in private sector employment for the month of September. Private sector employment decreased by 32,000 jobs in September, following a revised decline of 3,000 jobs in August. Economists had anticipated a rise in private sector employment by 50,000 jobs, in contrast to the previously reported increase of 54,000 jobs for the prior month. Bill Adams, remarked that the ADP report could significantly impact the Federal Reserve’s upcoming interest rate decision if the shutdown persists long enough to prevent the Fed from reviewing the September jobs report prior to their next meeting later this month.
The subsequent turnaround also came as analysts noted that the markets have historically not been significantly affected by government shutdowns. “On average, the S&P 500 has historically been about flat during shutdowns, with a slightly higher probability of gains vs. losses since 1976,” stated Jeff Buchbinder. He stated, “Considering that most of the losses came during the late 1970s, and the biggest decline during a shutdown since 1980 was 2.2%, history suggests stocks have a good chance of going higher during this shutdown, though past performance does not guarantee future results.” Pharmaceuticals extended the rally observed during the previous session, propelling the NYSE Arca Pharmaceutical Index up by 5.4 percent to its highest closing level in nearly seven months. Significant strength was also observed in computer hardware stocks, as the NYSE Arca Computer Hardware Index surged by 3.9 percent, reaching a record closing high. The NYSE Arca Biotechnology Index experienced a notable increase of 3.2 percent, reaching a record closing high, driven by significant strength in biotech stocks. Healthcare, semiconductor, and steel stocks demonstrated robust performances on the day, whereas airline and financial stocks experienced notable declines.