S&P 500 Set for First Record Since August as Bulls Downplay Risk

(Bloomberg) -- S&P 500 futures rose 0.5%, on track to close at the first record high in two months, buoyed by resilient corporate profits and a pullback in oil prices.

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The gauge is poised for a fourth consecutive advance and its longest winning run in about two months as investors looked past lingering inflation concerns. Contracts on the Nasdaq 100 gained 0.8% as of 8:10 a.m.

Strong corporate earnings, enthusiasm around the artificial intelligence trade and a US economy that has so far avoided a significant slowdown have fueled a roughly 14% advance in the S&P 500 this year. The rally is getting additional support from lower oil prices, which have helped temper concerns about rising consumer costs.

"As long as the incremental info on AI ROI we get from earnings and Anthropic's IPO filing over the next few weeks is good, there is little risk to the index," said Kevin Brocks, director at 22V Research. "The recent macro data indicates there's very little risk of recession, and not a large risk of the Fed needing to tighten financial conditions from here."

Positioning in Nasdaq 100 futures has also improved sharply. Citigroup Inc. strategists said the technology-heavy index posted the strongest weekly improvement in positioning among major markets as fresh risk-taking flows entered the market. Momentum has increasingly favored long positions in Nasdaq 100 futures.

Elsewhere in US equities, the picture is more mixed. Strategists led by David Chew said investors are growing increasingly bearish on small caps by continuing to build short positions in Russell 2000 futures.

A major reduction in futures exposure is also worrying. Non-dealers have sold almost $70 billion of S&P 500 futures over the past six weeks, according to an analysis of CFTC data, marking one of the largest positioning unwinds in roughly 15 years.

The scale of the selling is comparable with major positioning reversals seen in periods such as 2020 and 2022. But unlike those episodes, the market has barely moved: The S&P 500 is little changed over the six-week period.

Semiconductor stocks have led the broader market this year, supported by solid fundamentals and favorable technical signals. Valuations for the group also remain below historical averages. Analysts expect earnings growth across all technology industries, although four of the six groups are projected to see growth slow from the previous year. Overall, the earnings backdrop remains supportive for the sector.

Nvidia Corp. is meanwhile approaching a $6 trillion market value as investors return to the AI chipmaker. The stock has gained 28% this year, adding about $1.2 trillion to Nvidia's market value and making it the single biggest contributor to the S&P 500's advance.

The latest boost for the AI trade came from Advanced Micro Devices Inc. Chief Executive Officer Lisa Su, who said chip demand is likely to remain "very high" for the next several years. Her comments come as the industry contends with growing scrutiny around AI safety.

In deals, OpenAI is holding talks with several investment funds from the United Arab Emirates, including Abu Dhabi-based MGX, about helping anchor a $30 billion financing round for the ChatGPT maker, people familiar with the matter said.

Option Care Health Inc. jumped more than 20% before the bell on a Financial Times report that McKesson Corp. and private equity firm Clayton, Dubilier & Rice are nearing a deal to acquire the medical infusion-services provider. The transaction would value the company at more than $5 billion including debt.

In the IPO market, DayOne Data Centers Ltd. filed for a US listing, positioning the Singapore-based company to tap continued investor appetite for AI infrastructure.

Among individual stocks, Nike Inc. fell in premarket trading after Berenberg cut its recommendation to sell from hold. The brokerage sees more downside for the shares from challenges to Nike's position in the sportswear market and weakness in China.

Watch data centers and infrastructure stocks after Google parent Alphabet Inc. agreed to a 20-year deal to buy nuclear power from Constellation Energy Corp. Shares of Constellation gained 8.3% in premarket trading while Alphabet rose 0.4%.

Semiconductor stocks may get a boost after Advanced Micro Devices Inc. shares gained on forecasts for "very high" chip demand over the next few years. Separately, analysts raised their price targets on the stock, citing growth from AI agent products.

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