Nasdaq hits record close as AI optimism returns, Treasury yields slide

Sept 21 (Reuters) - The Nasdaq jumped to a record-high close on Monday, supported by gains in Advanced Micro Devices and other AI leaders. Treasury yields pulled back from recent peaks, and crude prices dropped to an 11-day low amid speculation that a UN meeting this week could produce a breakthrough in Middle East talks.

Chipmakers rallied, as Intel soared 12.2% and Arm Holdings climbed 17%. The PHLX semiconductor index advanced 4.3%.

Advanced Micro Devices gained roughly 10%, pushing its market capitalization to $1 trillion for the first time.

The Nasdaq's close marked its first record finish since June 2, while the S&P 500 finished about 0.4% shy of its August 13 record close.

Investors cited evidence that AI spending continues to grow, even after warnings about safety from leaders of major AI companies a week earlier sparked a global technology selloff.

The benchmark 10-year US Treasury yield slipped below the psychologically significant 5% mark. Brent crude futures fell below $100 a barrel to their weakest level since September 9, later settling at $100.34.

Although Washington and Tehran traded threats over the weekend, US President Donald Trump said he was willing to meet Iranian President Masoud Pezeshkian, who is expected to attend the UN General Assembly in New York this week.

Art Hogan, chief market strategist at B. Riley Wealth, said: "We’ve been kind of programmed to follow the price of oil and the yield on the US 10-year, and if you look at those two things today, they’ve shifted from being headwinds to tailwinds for this market, at least in the near term."

Meta's shares jumped 11.4% after Wells Fargo raised its price target on the social media company, following the recent debut of its Muse AI assistant.

The S&P 500 rose 1.49%, closing the session at 7,764.70 points.

The Nasdaq added 2.26% to end at 27,122.09, and the Dow Jones Industrial Average gained 0.71% to 52,048.83.

According to LSEG data, the S&P 500 traded last Friday at slightly less than 19 times expected earnings, its cheapest valuation since 2023. AI-focused heavyweights account for much of the recent rise in earnings expectations.

Investors stayed cautious about interest rates after the Federal Reserve last week lifted rates for the first time in three years to combat inflation. CME's FedWatch showed traders assigning a 50% probability to another increase next month.

At least 10 central bank policymakers are scheduled to offer commentary this week.

US-listed shares of Greenland-exposed companies climbed after diplomatic talks between the United States and Denmark over Greenland's status made progress.

Greenland Mines tripled in value, while Greenland Energy more than doubled.

A Chinese-US summit on Thursday could address extending the trade truce between the two powers, the Iran war and AI regulation. A report said the US proposed a six-month extension of the trade truce, while China sought a longer one.

Bitcoin, a key gauge of risk appetite, climbed more than 6% to a more than seven-month high, boosting Coinbase and Strategy.

Paramount Skydance fell nearly 3% after a source told Reuters the company had settled with California and 11 other states that sued to block its $110 billion merger with Warner Bros Discovery.

Eight of the 11 S&P 500 sector indexes gained, led by communication services, up 4.16%, followed by information technology, up 2.4%.

Within the S&P 500, advancing issues outnumbered decliners by 1.4 to one.

The S&P 500 recorded seven new highs and 29 new lows; the Nasdaq logged 64 new highs and 127 new lows.

US exchange volume was relatively strong at 16.5 billion shares, compared with an average of 16.2 billion over the prior 20 sessions.

Reporting by Johann M Cherian and Tharuniyaa Lakshmi in Bengaluru and Noel Randewich in San Francisco; editing by Pooja Desai and Matthew Lewis.