Stocks Bull Run Extends on Latest AI Deal Spree: Markets Wrap

(Bloomberg) — US stocks touched record highs amid another round of big-ticket artificial intelligence deals and partnerships, bucking the prospect of a prolonged shutdown and a gloomy reading on business activity. Treasuries and the dollar slid.

The S&P 500 rose 0.5%, setting the US benchmark on track for a sixth straight gain and its longest winning streak since July. The gauge has now gone 114 trading sessions without a 5% pullback, taking investors on a one-way march higher.

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The Russell 2000 also hit an all-time high with quantum computing and energy stocks leading the small-caps gauge higher after Global Infrastructure Partners’ advanced talks to acquire Aligned Data Centers. The deal values the company, a major beneficiary of the AI spending boom, at about $40 billion and stoked traders’ optimism. In Asia, Japan’s Hitachi Ltd. teamed up with OpenAI on energy and related infrastructure, while Fujitsu Ltd. expanded its collaboration with Nvidia Corp.

The Nasdaq 100 edged higher, but struggled to hold onto an all-time high after a readout from the Institute for Supply Management weighed on the rally. It showed the US service sector stalled in September as business activity shrank for the first time since the pandemic and orders barely expanded.

The continued optimism around AI is fueling questions over how far the rally can run. Concerns are growing that valuations look overheated as spending has yet to translate into earnings.

“While it’s been very difficult to stand in front of this market, storm clouds are darkening, including the late-‘90s-like trends unfolding in tech/AI, a disconnect between Fed rhetoric and market expectations around easing,” writes Vital Knowledge’s Adam Crisafulli. Bears see investors as “very complacent about the shutdown, with most assuming it will be wrapped up in under two weeks, but there doesn’t seem to be substantive movement toward a compromise.”

Among signs that the market is getting frothy: a sentiment gauge compiled by Barclays Plc has been sitting near a level that indicates exuberance. A similar Bloomberg Intelligence measure is back to a “manic” zone that’s preceded lukewarm returns in the past.

While investors are wagering that the billions pouring into the AI sector will translate into profits and extend gains in tech shares benchmarks are also bumping up against technical levels that often signal a decline is imminent.

Friday’s burst of new partnerships and potential deals came just a day after a share sale lifted OpenAI’s valuation to $500 billion. Equities have climbed to successive record highs this year, with AI optimism adding to bullish momentum from prospects of monetary policy easing and resilient earnings.

What Bloomberg Strategists say….

“Stocks have pared gains after the latest ISM Services data signaled fading economic activity but seeing persistent inflationary pressures. That’s not a good combination for risk assets, which have been riding on optimism about Fed rate cuts.”

—Tatiana Darie, Macro Strategist, Markets Live

For the full analysis, click here.

Fed officials disagree about how much further to reduce borrowing costs after lowering their benchmark rate by a quarter percentage point last month. Federal Reserve Bank of Chicago President Austan Goolsbee reiterated his view that officials should proceed carefully with interest-rate cuts while Fed Governor Stephen Miran, who advocated for larger cuts in September, said he’d amend his inflation view if housing costs unexpectedly jumped.

The benchmark 10-year which helps set a range of borrowing costs in the US rose 2 basis points to 4.10% while the dollar slumped, on track for its worst week since August. Swaps traders remain confident in another quarter-point cut in October, despite the temporary data blackout during the US government shutdown.

In commodities, gold was on track for a seventh weekly gain, fueled by central bank buying amid falling US interest rates and lingering inflation concerns. And despite all the hype around AI and the surge in chip stocks this year, gold miners have actually been the better bet.

In other corners of the market, oil headed for its biggest weekly decline since late June, ahead of an OPEC+ meeting that’s expected to result in the return of more idled barrels.

Corporate News:

Applied Materials Inc. shares dropped 2.4% after a $600 million hit to its 2026 revenue. Boeing Co.’s 777X is slated to fly commercially for the first time in early 2027 instead of next year, people familiar with the matter said, a fresh setback to the US planemaker that sets the stage for potentially billions of dollars in accounting charges. Huawei Technologies Co. used advanced components from Asia’s largest technology firms in at least some of its leading Ascend AI processors, a research firm discovered during teardowns. Some of the main moves in markets:

Stocks

The S&P 500 rose 0.5% as of 11:56 a.m. New York time The Nasdaq 100 rose 0.1% The Dow Jones Industrial Average rose 0.9% The Stoxx Europe 600 rose 0.5% The MSCI World Index rose 0.6% The Russell 2000 Index rose 1.4% Currencies

The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.3% to $1.1747 The British pound rose 0.3% to $1.3485 The Japanese yen was little changed at 147.34 per dollar Cryptocurrencies

Bitcoin rose 1.1% to $122,073.39 Ether rose 0.7% to $4,523.49 Bonds

The yield on 10-year Treasuries advanced two basis points to 4.10% Germany’s 10-year yield was little changed at 2.70% Britain’s 10-year yield declined two basis points to 4.69% Commodities

West Texas Intermediate crude rose 0.9% to $61.04 a barrel Spot gold rose 0.9% to $3,889.41 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, Cecile Gutscher, Andre Janse van Vuuren, Levin Stamm and Alex Nicholson.

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