Wall Street closed higher on Monday as the artificial intelligence (AI) trade regained momentum. The weak nonfarm payrolls data of June, which was released last week, also bolstered investors’ confidence that the Fed may not raise the benchmark lending rate anytime soon. All three major stock indexes ended in positive territory.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.3% or 155.84 points to close at a record high of 53,055.91. Notably, 18 components of the 30-stock index ended in positive territory while 12 ended in the red. This was the first close of the index above the crucial technical barrier of 53,000. In intraday trade, the blue-chip index touched an all-time high of 53,060.10.
The tech-heavy Nasdaq Composite finished at 26,121.16, rallying 1.1% or 288.49 points on strong performance by AI giants. The S&P 500 advanced 0.7% to finish at 7,537.43. Eight out of 11 sectors of the broad-market index ended in positive territory while three finished in negative territory.
The Health Care Select Sector SPDR (XLV), the Utilities Select Sector SPDR (XLU), the Consumer Staples Select Sector SPDR (XLP), the Materials Select Sector SPDR (XLB), the Financials Select Sector SPDR (XLF) and the Real Estate Select Sector SPDR (XLRE) advanced 2.6%, 2.2% and 2%, 1.9%, 1.5% and 1.1%, respectively. On the other hand, the Information Technology Select Sector SPDR (XLK), tumbled 2.7%.
The fear gauge CBOE Volatility Index (VIX) fell 1.5% to 15.57. A total of 16.8 billion shares were traded on Monday, lower than the last 20-session average of 23.4 billion. Advancers outnumbered decliners on the NYSE by a 1.01-to-1 ratio. On the Nasdaq, a 1.3-to-1 ratio favored declining issues.
AI Trade Gathers Pace
AI trade is gathering steam after last week’s softness. AI infrastructure trade is now expanding from chips to memory and storage devices as well as servers and racks. Moreover, agentic AI is expanding the scope of AI infrastructure providers in the physical layer. Massive AI data center growth is benefiting several nuclear power generator and reactor makers, construction giants, cooling and water purifying companies and industrial manufacturers.
The four major hyperscalers raised their AI capital expenditure budget to $750 billion for 2026. This figure is set to cross $1 trillion next year and is likely to rise further beyond 2027. The major reason for the hike is due to expectations of higher AI infrastructure component prices and incremental costs for expanding data center capacity in the near future.
Research firm McKinsey & Co. estimated that global AI-powered data center infrastructure capex will reach around $7 trillion by 2030. Moody’s estimated more than $3 trillion in capital investment for AI-data centers by these four giant hyperscalers in the next five years.
Consequently, shares of AI-centric stocks like Advanced Micro Devices Inc. AMD, Western Digital Corp. WDC, Seagate Technology Holdings plc STX and Teradyne Inc. TER surged 6.6%, 7.1%, 5.9% and 2.9%, respectively. Western Digital and Seagate Technology currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Economic Data
The Institute of Supply Management reported that the services PMI (purchasing managers’ Index) for June came in at 54%, marginally above the Zacks Consensus Estimate of 53.9%. The metric for May was 54.5%. Any reading above 50% indicates the expansion of service activities.
The business activity index fell to 55.4% in June from 57.7% in May. The new orders index fell to 55.1% in June from 57.3% in May. The prices index decreased to 67.7% in June from 71.3% registered in May.
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This article originally published on Zacks Investment Research (zacks.com).
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