Nasdaq Record Close 27,477 as Rate-Hike Odds Drop to 24%

Market participants should read Oct 5's record close as a repricing of Federal Reserve risk, not just an index milestone: CME FedWatch shows only a 24% chance of an October hike, down from 70% just one week ago. With Q3 earnings season beginning next week and LSEG projecting S&P 500 earnings growth above 30% year-over-year, the critical test is whether AI-driven profit expansion can justify current valuations at record levels.

On Monday, Oct 5, 2026, the Nasdaq Composite closed at a record 27,477.31, up 1.05%, marking its second consecutive session of sharp gains following weaker-than-expected U.S. jobs data released on Oct 2. The rally was led by Nvidia, which rose 2.1% to its own record close and reached a market capitalization of $5.76 trillion, and Microsoft, which added 1.5%. The S&P 500 gained 0.66% to 7,773.95, sitting just 0.3% below its Aug 13 record high close, while the Dow Jones Industrial Average rose 0.18% to 51,267.90. The move came as oil prices slipped on increased Middle East crude exports and a Group of Seven pledge to boost supplies, offering investors a favorable inflation signal ahead of third-quarter earnings season.

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The rally was led by Nvidia, which rose 2.1% to its own record close and reached a market capitalization of $5.76 trillion, and Microsoft, which added 1.5%.

At the center of the market's shift is the Federal Reserve rate path. The Oct 2 employment report showed U.S. job growth slowed more than expected in September, prompting traders to slash the probability of an interest rate hike at the Fed's October policy meeting to 24% from 70% just one week earlier, according to CME's FedWatch tool. That repricing has been a major tailwind for rate-sensitive growth and technology stocks, which dominate the Nasdaq. Lower energy prices further reinforced expectations that inflationary pressures are easing, reducing the urgency for additional tightening.

The Nasdaq's previous record close had been set on Sep 22, meaning the index has now reset its high watermark twice within two weeks. While the S&P 500 is not yet at a record, its proximity to the August high suggests the broader market is participating, though the Dow's modest 0.18% gain indicates leadership remains concentrated in large-cap technology and AI names.

Investors are now pivoting to third-quarter earnings season, which kicks off next week with reports from large U.S. banks. LSEG data shows analysts on average expect S&P 500 earnings to jump more than 30% year-over-year, a forecast driven largely by AI-related stocks. That expectation raises the stakes for Nvidia, Microsoft, Meta and Tesla—all of which gained around 1.5-2% on Oct 5—to deliver results that justify elevated valuations. The concentration of gains in a handful of mega-cap names means any disappointment could trigger outsized index-level declines.

The session also featured significant M&A activity: PTC surged 33% after France's Schneider Electric agreed to acquire the industrial software firm for $22.6 billion in an all-cash transaction. The deal underscores continued corporate confidence in industrial digitalization and software assets, even as macroeconomic uncertainty persists.