The three main stock market indices in the United States are firing on all cylinders this year. The S&P 500 Index jumped to a record high of $6680 on Wednesday, even as the government shutdown started. It has jumped by 40% from its April lows.
Similarly, the tech-heavy Nasdaq 100 Index has jumped to a record high of $24,800, up by 50% from the April lows when Donald Trump unveiled his reciprocal tariffs, A $10,000 investment in a fund tracking the index in January 2020 would now be worth over $28,000.
The Dow Jones Index has also jumped in the past few year. It jumped to a record high of $46,440, also much higher than the April lows of $36,570.
AI tailwinds have boosted the S&P 500, Nasdaq 100, and Dow Jones
The main reason why the blue-chip indices in the United States have jumped this year is that the macro theme of AI is still dominating Wall Street.
One way of checking out how the AI industry is doing well is to look at the top gainers in each of these indices. Palantir, Micron, AppLovin, Lam Research, Intel, Zscaler, CrowdStrike, and Broadcom are the top gainers in the Nasdaq 100 Index.
Similarly, Seagate Technology, Western Digital, Palantir, Micron, and Lam Research are also leading the S&P 500 Index.
Nvidia, whose stock is up by 37% this year, is also responsible for most gains in the Dow Jones Index.
This growth, and some of the recent announcements, mean that the AI bubble is yet to pop. For example, OpenAI is now valued at over $500 billion, while AI infrastructure companies like Nebius and CoreWeave have received orders worth billions of dollars.
Federal Reserve interest rate cuts
The other key driver for the S&P 500, Nasdaq 100, and the Dow Jones is the Federal Reserve. After months of resisting cuts, the bank finally decided to cut interest rates in its September meeting.
Most notably, officials hinted that they would deliver more cuts in the final meetings of the year. Odds of more cuts jumped after ADP published a weak jobs report on Wednesday.
This report showed that the private sector lost 36,000 jobs in September after shedding over 3,000 jobs in the previous month.
The stock market does well when the Fed is cutting interest rates as investors normally rotate from bonds to the equity market.
Strong corporate earnings
Meanwhile, the three main indices, like the S&P 500, Dow Jones, and the Nasdaq 100 are doing well as American companies published strong results despite Donald Trump’s tariffs.
The second-quarter results showed that companies had earnings growth of 11%. It was the fourth consecutive quarter of strong double-digit growth.
Analysts expect that the third quarter earnings will show that companies grew by 7.8%. Odds are that they will publish strong results, helped by the AI tailwinds. If this happens, these indices will likely continue soaring.
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