The stock rally fueled by the hype surrounding artificial intelligence is spreading beyond the technology sector, defying critics and raising concerns about an overbought market.
Increasing bets that the Federal Reserve will end its tightening cycle sooner rather than later to avoid a recession fueled the equity rally, with the S&P 500 topping 4,400 and rising for the sixth day in a row. The Dow Jones Industrial Average gained nearly 20% from its September low, while the Nasdaq 100 closed at its highest level since March 2022.
Microsoft, which has unveiled a slew of AI-based products in recent months, has set a new high. On a bullish outlook, Lennar led a rally in homebuilders. Cava Group soared in its initial public offering. Delta Air Lines rose for the 15th consecutive session after its board voted to reinstate the quarterly dividend. A gauge of Chinese stocks listed in the United States rose as Beijing is expected to provide additional stimulus to the economy.
The fervor on Wall Street will be put to the test on Friday when a massive amount of options contracts tied to stocks and indexes are set to mature. The occurrence, known as OpEx, typically forces traders to either roll over existing positions or open new ones. This usually involves portfolio adjustments, which result in an increase in volume and sudden price swings.
Equities gained traction after the US benchmark broke through the bull-market barrier last week, rising more than 20% from its October low. Traders continued to pile into stocks even after the S&P 500's 14-day relative strength index surpassed 70, which some traders regard as an indication of an overbought market.
