The Nasdaq composite index closed at a record high Wednesday, rallying almost 350 points for its first-ever close above 20,000.
The tech-heavy index gained 1.8 percent after November’s inflation report matched expectations from economists, reinforcing expectations that the Federal Reserve will cut interest rates again at its December meeting next week. The broader S&P 500 closed up 0.8 percent Wednesday, while the Dow Jones Industrial Average fell 0.2 percent.
The Nasdaq’s record close put an exclamation point on a year in which Big Tech stocks, fueled by investor interest in artificial intelligence, have powered all three major indexes to remarkable gains. The Dow and S&P 500 are on track to end 2024 up 17 percent and 28 percent, respectively. But the Nasdaq has been the biggest winner from this year’s tech share surge, soaring more than 33 percent since January.
The explosion of attention around artificial intelligence — and the market’s jitters over the sustainability of the AI trade — hasn’t dissuaded people from piling into tech stocks, said Jamie Cox, a managing partner for Harris Financial Group.
“You’re starting to see the transition from AI as a concept to AI as a reality,” Cox said. “That transition is propelling the index higher.”
November’s consumer price index reading, released Wednesday morning, showed a 0.3 percent rise from October and 2.7 percent increase from the same month last year. While inflation remained stubborn this fall, last month’s slight uptick wasn’t concerning enough to jeopardize another Fed rate cut, said Adam Turnquist, chief technical strategist for LPL Financial.
“CPI today solidified a cut next week and it keeps the rate-cutting cycle on the table,” he said. “I would not be surprised to see the classic Santa Claus rally into year-end.”
Big tech stocks led Wednesday’s rally, with Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla all gaining more than 1 percent. Apple was the only stock in the so-called Magnificent Seven that closed lower.
The tech sector gains come after Google said it made a breakthrough in quantum computing with its new generation of chip. That news and “anything tangentially related to growth” and innovation in the semiconductor space is driving the Nasdaq’s gains, said Alex McGrath, chief investment officer with Greenville, South Carolina-based NorthEnd Private Wealth.
“Semiconductors seem to be the engine that keeps the Nasdaq rolling these days,” McGrath said.
Meanwhile, Tesla’s one-day gain of almost 6 percent Wednesday came after its chief executive, Elon Musk, became the first person to reach $400 billion in net worth, according to Bloomberg. A key political donor and advocate for President-elect Donald Trump, Musk’s fortune soared with Tesla’s post-election share-price gains and crossed the $400 billion threshold after he sold insider shares of SpaceX, Bloomberg reported.
Tesla’s stock is up about 67 percent since the election and about 70 percent this year. Investors have piled into the stock with hopes that the electric-vehicle maker will benefit from streamlined regulation on autonomous driving during the new Trump administration.