Wall St rises on AI euphoria after Micron’s upbeat forecast

(Refiles to add “%” sign in last bullet for )

By Johann M Cherian and Purvi Agarwal

(Reuters) -Wall Street’s main indexes rose on Thursday, with the S&P 500 hitting a record high, as Micron’s upbeat forecast revived the frenzy around artificial intelligence, and a softer-than-expected jobless claims report soothed worries about the labor market.

Micron Technology (NASDAQ:) jumped 17.3% after the memory chip maker forecast higher-than-expected first-quarter revenue, underscoring that demand for memory chips used in AI computing was robust.

The optimism lifted other chip stocks, with Nvidia (NASDAQ:) rising 2.8%, Advanced Micro Devices (NASDAQ:) advancing 3.6% and Broadcom (NASDAQ:) adding 2.2%. The broader jumped 3.7% to levels seen more than two months ago.

Investors also scrutinized a Labor Department report that showed jobless claims came in at 218,000 for the week ended Sept. 21, below estimates of 225,000.

“Better employment numbers mean that the Fed will only cut by 25 bps at the next meeting … on the one hand we won’t get a bigger rate cut, but on the other hand, it indicates the economy is strong, which is good news,” said Melissa Brown, managing director of investment decision research at SimCorp.

Separately, the final reading of gross domestic product confirmed that the economy grew 3% in the second quarter.

At 9:46 a.m., the rose 219.41 points, or 0.52%, to 42,134.16, the S&P 500 gained 37.03 points, or 0.65%, to 5,759.29 and the gained 201.80 points, or 1.12%, to 18,284.01.

Six of the 11 S&P 500 sectors rose, with technology rising 1.3%. Energy stocks slipped 1.4%, tracking crude prices that slid on expectations of greater supply by the Organization of Petroleum Exporting Countries. [O/R]

The index tracking small caps also added 1.1%.

The benchmark S&P 500 and blue-chip Dow have hit multiple record highs since the start of this year and the tech-laden Nasdaq is about 2% away from its own milestone. Optimism around AI and expectations of lower interest rates have led markets to rally this year.

Late on Wednesday, Fed Governor Adriana Kugler said she “strongly supported” the central bank’s decision to kick off monetary policy easing with a rare half a percentage point cut last week, as part of an emerging focus on the job market.

Traders now see a 54.6% chance of the Fed delivering a 50 basis point rate cut in November, up from 38.8% a week ago, as per the CME Group’s (NASDAQ:) FedWatch Tool.

Among others, miners such as Freeport-McMoRan (NYSE:) rose 6.9%, while lithium miners such as Albemarle (NYSE:) climbed 6% and Arcadium added 4.4% after China pledged to deploy “necessary fiscal spending”. The broader materials index rose 1.36%.

U.S.-listed Chinese firms such as Li Auto (O:) and PDD Holdings (O:) advanced 11%, while Alibaba (N:) added 7.5%.

Southwest Airlines (NYSE:) climbed 9.7% after the carrier raised its third-quarter revenue forecast, while Accenture (NYSE:) gained 7% after the IT services provider forecast annual revenue above estimates.

Advancing issues outnumbered decliners by a 3.59-to-1 ratio on the NYSE and by a 3.67-to-1 ratio on the Nasdaq.

The S&P 500 posted 37 new 52-week highs and two new lows, while the Nasdaq Composite recorded 66 new highs and 20 new lows.