Chipmakers Drive The Nasdaq To A Record High Close

A rally in chipmakers carried the Nasdaq Composite to a record close on Monday, even though not a single big company reported earnings to justify it. What moved the market was optimism about a U.S.-China dialogue on artificial-intelligence safety ahead of Thursday's Trump-Xi summit, plus cheaper oil and easing long-term borrowing costs. Underneath the record, the market is narrower than it looks: most stocks in the S&P 500 are still well below their own highs.

Fast Facts

• Advanced Micro Devices rose about 10% to an all-time high near $613.92, its shares worth more than $1 trillion in total for the first time and the fourth U.S. chip company to reach that mark (Read More)
• Meta Platforms gained about 11%, capping the stock's best month in years as investors warmed to early traction for its new Muse artificial-intelligence assistant (Read More)
• Microsoft's annual report disclosed $24.1 billion of revenue from its arrangements with OpenAI in its 2026 financial year, roughly 7% of company sales (Read More)
• Rocket Lab raised $1.94 billion selling about 29.3 million new shares near $66 apiece to help pay for its acquisition of satellite operator Iridium (Read More)
• CarMax cut 145 corporate jobs, about 4% of its white-collar staff and its third round of cuts in 12 months, amid a soft used-car market (Read More)
• Bitcoin traded above $86,000 for the first time since late January, an eight-month high, up more than 30% since August 19 (Read More)

Global News

• The United Kingdom borrowed £18.3 billion in August, about £3.5 billion more than the government's own forecasters expected, weeks before a new budget (Read More)
• BlackRock became the first wholly foreign-owned public fund manager granted Qualified Domestic Institutional Investor status in China, a license that opens a US$149 billion market (Read More)
• Germany's far-right Alternative for Germany won a third state election, and Chancellor Friedrich Merz's Christian Democratic Union was shut out of a state parliament for the first time (Read More)
• Britain's Kingfisher reported higher first-half profit, lifted its full-year outlook and said it would begin a third £50 million tranche of share buybacks this week (Read More)

Chipmakers Drove The Nasdaq To A Record Close On Summit Optimism

The Nasdaq Composite rose 2.26% on Monday, September 21, closing at a record 27,122.09, a gain of roughly 599 points. The S&P 500 rose 1.49% to 7,764.70, and the Dow Jones Industrial Average added 366.19 points, or 0.71%, to 52,048.83. What is unusual is what did not cause it. No major company reported earnings. The move came out of optimism about a U.S.-China dialogue on artificial-intelligence safety ahead of Thursday's Trump-Xi summit in Washington, helped by cheaper oil and by long-term borrowing costs that fell for a second straight session.

Semiconductor companies led. Advanced Micro Devices rose about 10% to an all-time high near $613.92 and finished the session with a market capitalization, the combined value of all its shares, reported above $1 trillion for the first time. It is the fourth U.S. chip company to reach that level, after Nvidia, Broadcom and Micron. Intel gained about 12%, Arm Holdings about 10%, and Meta Platforms about 11%. Brent crude, the main international oil benchmark, fell 3.4% to $100.34 a barrel on hopes of renewed U.S.-Iran talks at this week's United Nations General Assembly. The 10-year Treasury par yield, what the federal government pays to borrow for a decade, closed at 4.96% on Monday, down 5 basis points (hundredths of a percentage point) from 5.01% on Friday, September 18.

Those falling yields do quiet work underneath the chip rally. A company expected to earn most of its money many years from now is worth more today when long-term bond yields fall, because those future profits get converted into present-day dollars at a gentler rate. That is why the longest-dated bets in the market, chip designers building for demand that has not arrived yet, swing hardest on a five-basis-point move that barely registers elsewhere. Those same yields are the benchmarks lenders price 30-year mortgages against, which is how a bond move in New York reaches a kitchen table.

Two cautions belong alongside the record. MarketWatch reports that roughly 60% of the stocks in the S&P 500 sit more than 20% below their own all-time highs, even with the index near a record. That is possible because the S&P 500 is weighted by company size, so a handful of very big companies can carry it while most of the list lags. And the summit the optimism was built on has not happened yet; by Tuesday morning, September 22, crude had edged back up as hopes for U.S.-Iran talks faded.

Sources: Yahoo Finance · CNBC · WSJ close · MarketWatch · WSJ oil · Nasdaq · U.S. Treasury

Paramount Settled With A Dozen States, Clearing The Last Obstacle To Its Warner Bros. Deal

Paramount Skydance settled the antitrust lawsuit brought against it by a dozen state attorneys general, led by California's Rob Bonta. Antitrust law governs whether a merger leaves a market with too little competition, and until Monday this case was the last obstacle to Paramount's purchase of Warner Bros. Discovery. Paramount is acquiring the company at $31 a share in cash. That comes to roughly $81 billion in equity value, what all of the shares are worth, and roughly $110 billion in enterprise value, which adds about $29 billion of debt the buyer takes on. If one headline says $81 billion and another says $111 billion, both are right; they measure different things, and the honest way to quote a deal is to say which one you mean.

Warner Bros. Discovery shares rose 10.79% on Monday, and nothing about the business changed that day. No subscriber count, no box office weekend, no earnings report. What changed was the odds. When a company agrees to be bought at a fixed price, its shares normally trade a little below that price until the deal closes, because there is always a chance it never does. That gap is the market pricing the risk of the deal dying, and traders who buy it on purpose are doing what is called merger arbitrage, betting the deal survives. Remove the last legal obstacle and most of the gap disappears, which is what a 10.79% jump in a long-public target looks like from outside.

The settlement does not force Paramount to sell anything. Instead it binds the company to promises with penalties: keep operations in California, do not sell the Paramount or Warner Bros. lots for five years, spend at least $300 million more a year on U.S. film production for a total of $1.5 billion over five years, and release at least 30 movies theatrically a year. Miss those and the states can seek divestiture, a court order forcing a sale of assets. That last number is the countable one, and a student can check in 2031 whether the studio cleared 30 releases each year. This is what the end of a big antitrust fight usually looks like: large mergers are rarely blocked outright, they are conditioned, and the conditions are the story.

Sources: NPR · CNBC · Paramount · Yahoo Finance

Short-Term Yields Rose, Long-Term Yields Fell, And The Gap Between Them Is The Story

Last week's Fed decision, its first rate increase in three years, was the headline; what has changed since is the shape of what the government pays to borrow. In the September 21 session, short-term Treasury yields went up and long-term Treasury yields went down. The 3-month yield closed at 4.17% and the 6-month at 4.27%, each up 3 basis points, meaning 3 hundredths of a percentage point, from the September 18 close. The 1-year added 1 basis point to 4.45%, and the 2-year held at 4.76%. Everything longer fell: the 10-year closed at 4.96%, down 5 hundredths of a point, the 20-year at 5.33% and the 30-year at 5.29%, both down 5 as well. Six days earlier, on September 15, the 10-year was above 5%. At the September 21 close, the gap between what the government pays to borrow for two years and for ten years was 20 basis points; from three months out to ten years, it was 79.

Two directions at once is the interesting part, because each end of that range answers a different question. Short-term yields mostly track where the Fed is setting policy right now, which is why they rise when the Fed raises its target range. Yields on loans that run ten or thirty years are the extra compensation lenders ask for locking their money away that long, and much of it is protection against inflation eating the value of the repayment. When lenders grow more confident that inflation will be contained, the price of that protection falls, which is how the longest yields can drop on a day the shortest ones climb. The Wall Street Journal reported the view of Swiss bank Julius Baer that stronger Federal Reserve credibility was containing long-term borrowing costs. That end of the range is also where households live, since long-term mortgage rates track the 30-year Treasury yield, so a bond investor's view on inflation two decades out eventually helps set a family's monthly payment.

Sources: U.S. Treasury · Federal Reserve H.15 · WSJ

What To Watch

Reporting today: AutoZone (AZO) is expected before the open, with analysts' average estimate at $54.78 in earnings per share versus $48.71 a year ago; Thor Industries (THO) is also expected before the open. KB Home (KBH) and Worthington Enterprises (WOR) are expected after the close. Federal Reserve Vice Chair Philip Jefferson is expected to speak at 10:20 a.m. ET on the discount window and Treasury market functioning.

Later this week:

• Cintas (CTAS), Paychex (PAYX) and General Mills (GIS) are expected before the open Wednesday; General Mills' estimate is $0.72 against $0.86 a year ago
• Fed Governor Michael Barr is expected to speak on housing at 10:05 a.m. ET Wednesday
• Costco (COST) is expected after Thursday's close, the largest company on the calendar at roughly $397 billion, with an estimate of $6.48 versus $5.87 a year ago
• President Trump is scheduled to host President Xi Jinping on Thursday, with a tariff truce set to expire in November
• The Bureau of Economic Analysis is expected to publish GDP and corporate profits on September 30

The Classroom Takeaway

A record close while most of the list is falling is a puzzle worth sitting with: a size-weighted index can be carried by a few giant companies even as the majority lag, and the only way to feel that is to hold a handful of names and watch them move apart. A stock market simulator lets a student build a small basket and see for themselves how much one big winner can hide.