US stocks closed higher in late Thursday trading, with the Dow Jones Industrial Average gaining over 100 points. OpenAI enthusiasm drove technology stocks higher as investors appeared to bet that the US government shutdown would be brief and unlikely to severely impact the American economy.
The Dow Jones gained 129.97 points, or 0.28%, to close at 46,571.07 points; the Nasdaq rose 87.05 points, or 0.38%, to 22,842.21 points; the S&P 500 index advanced 8.07 points, or 0.12%, to 6,719.27 points.
A series of positive developments in the artificial intelligence (AI) sector propelled global chip stocks higher, with shares of NVIDIA, AMD, and SK Hynix rising.
OpenAI, the parent company of ChatGPT, saw its valuation soar to $500 billion following a round of employee stock sales. Despite market concerns about an AI bubble, this news still boosted expectations for technology stock gains. The company has also replaced Elon Musk's SpaceX to become the world's most valuable startup.
Occidental Petroleum shares rose after Warren Buffett's Berkshire Hathaway announced it would acquire Occidental's petrochemical subsidiary OxyChem for $9.7 billion in cash. This marks Berkshire's largest transaction since 2022.
US stocks closed higher on Wednesday as markets expected the federal funding interruption to be brief and therefore unlikely to seriously impact the American economy.
The S&P 500 index recorded its 29th closing record high of the year, closing above the 6,700-point threshold for the first time. The index had earlier set an intraday record high during the session. The Dow Jones Industrial Average also set a closing record.
The US government shutdown began on Tuesday after Democratic and Republican leadership failed to reach a funding agreement to keep the government operating before the deadline.
Congressional lawmakers blamed each other for causing the government shutdown. Democrats insisted on using the legislation to extend healthcare tax credits for millions of Americans, but faced Republican opposition.
For investors, the biggest question is how long the current bipartisan deadlock will persist. According to analysis, the shutdown will likely last at least three days, as the Senate is scheduled to recess on Thursday to observe Yom Kippur, making Friday the next possible date when senators are expected to vote again.
According to market prediction tools, traders are betting the shutdown could last nearly two weeks.
Dan Niles, founder and portfolio manager of Niles Investment Management, stated: "My view is that this government shutdown may last longer than the 2018 one, but other factors will ultimately be more important, such as: 1) robust third-quarter earnings results to be announced; 2) continued AI enthusiasm driven by solid quarterly performance from the Magnificent Seven tech stocks; 3) the Fed's next meeting on October 29, where I expect the Fed to maintain its path of three rate cuts this year."
Niles added: "Overall, I believe that despite potential near-term market volatility, the market will ultimately reach new highs as it slowly grinds higher."
Historically, US stocks have been minimally affected by government shutdowns, but investors are paying closer attention to this shutdown given the more volatile current policy and macroeconomic backdrop, elevated market valuations, high market concentration levels amid the AI-led rally, and persistent inflation concerns.
President Trump has threatened to permanently lay off federal workers on a massive scale during the shutdown, exacerbating existing concerns about labor market slowdown.
The economic data "blackout period" during this week's government shutdown is also drawing attention. Given that the Department of Labor has suspended almost all activities, the September nonfarm payrolls report will not be released on Friday.
Following Wednesday morning's ADP data showing private sector employment declined last month, the Federal Reserve is expected to announce a rate cut at its October meeting, while the further impact of a prolonged shutdown remains to be seen.