(Nov 3): US stocks continued a six-month bull run on Monday as Amazon.com Inc rolled out a years-long artificial intelligence (AI) deal with OpenAI and the government shutdown left investors scouring private data for clues about the economy.
The S&P 500 Index climbed 0.2% at 9.48am in New York, kicking off the month of November by extending gains for a second-straight session. Meanwhile, the tech-heavy Nasdaq 100 Index climbed 0.7%.
Amazon shares jumped 4.89% after the tech giant’s cloud unit signed a US$38 billion deal to supply OpenAI with Nvidia Corp graphics processing units as part of a seven-year deal. While Amazon has struggled to compete in AI, it provides an endorsement of its ability to build and run enormous networks of data centres.
The deal adds fuel to the AI boom that has fuelled the rally in stocks over the last six months. Last week saw five of the Magnificent Seven report earnings, with those providing a positive picture on their AI efforts benefiting the most.
Miller Tabak’s Matt Maley said the broader tech advance could take a breather this week, noting that breadth had become “quite poor recently” and some of the “most important hyperscalers are starting to act quite poorly on a short-term basis”.
“If a pullback does indeed take place, it would not be the worst thing in the world,” said Maley. “In fact, it could actually be seen as normal and healthy.”
See also: S&P 500 jumps as strong Amazon, Apple scorecards reignite rally
The focus for AI bulls has turned toward Palantir Technologies Inc, one of the biggest beneficiaries of the boom. The software company has surged 171% so far this year.
“Investors will be watching to see if the commercial segment can maintain its hyper-growth pace and show that the AI demand story is scaling beyond government contracts,” said Jay Woods, chief market strategist at Freedom Capital Markets.
Meanwhile, Kimberly-Clark Corp shares slid 12% after agreeing to buy Tylenol maker Kenvue Inc in a deal worth around US$40 billion. Kimberly-Clark said the combination would create a company with US$32 billion in revenue and allow it to surpass Unilever plc to become the second-biggest seller of health and wellness products after Procter & Gamble Co. But it also saddles the company with potential legal concerns down the road.
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“Kimberly-Clark acquiring Kenvue was something we thought would be probable, but the timing is earlier than we expected,” RBC Capital Markets analyst Nik Modi wrote in a note published on Monday morning. “Long-term, we believe this deal is strategically transforming for Kimberly-Clark as it adds significant positive diversification to its business mix.”
However, Modi notes that it will take some time for investors to process the long-term implications, and sees it likely that the stock will trade sideways until more context around Kenvue regulation and litigations and how Kimberly-Clark intends to turn the business around.
With most official data releases stalled by the government shutdown, investors are looking to private data to get clues on the health of the US labour market. The Institute for Supply Management’s manufacturing and services surveys are due Monday and Wednesday.
Also in focus will be comments from several Federal Reserve policymakers. Governor Lisa Cook will discuss the economy and monetary policy this afternoon at the Brookings Institution, while San Francisco Fed’s Mary Daly participates in a moderated discussion.
In terms of single stock moves, MongoDB Inc gained after naming Chirantan “CJ” Desai as president and chief executive officer.
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