FILE PHOTO: The Wall Street entrance to the New York Stock Exchange (NYSE) is seen in New York City, U.S., November 15, 2022. REUTERS/Brendan McDermid/File Photo

By Twesha Dikshit and Purvi Agarwal

2025 -The S&P 500 and Nasdaq edged higher on Monday, after a slew of AI deals boosted megacap companies Amazon and Nvidia, while hawkish comments from Federal Reserve officials kept optimism in check.

Amazon.com hit a record high after signing a multi-year $38 billion deal to supply cloud computing services to OpenAI, giving the ChatGPT maker access to Nvidia's graphics processors.

Nvidia gained 3.2% after President Donald Trump said the company's most advanced chips will be reserved for U.S. companies and Microsoft secured export licenses to use its chips in UAE data centers.

Loop Capital raised its price target for Nvidia stock by $100, which also helped gains.

Optimism around AI has been driving markets to record highs after several so-called "Magnificent Seven" companies pointed to a surge in spending on the technology. The S&P 500 and the Nasdaq marked their longest monthly winning streaks in years in October.

Investors await results from Advanced Micro Devices and Qualcomm, among others this week.

"What's creeping in is this narrative about AI and when business plans will be demonstrated to guide investors about when they will see profits from the AI investments," said Peter Andersen, founder of Andersen Capital Management.

"Those that are starting to think that the financing of these deals, which are now being done off balance sheet in special purpose vehicles, might be an early sign of the frailty of financing these deals."

The consumer discretionary and information technology sectors gained 1.7% and 0.6%, respectively, kept the S&P 500 afloat. Most other sectors fell, with financials the biggest drag.

Kenvue jumped 16.5% after Kimberly-Clark said it will acquire the Tylenol maker in a deal valued at more than $40 billion. Kimberly-Clark slid 12.5%.

At 11:54 a.m. ET, the Dow Jones Industrial Average fell 186.25 points, or 0.39%, the S&P 500 gained 10.83 points, or 0.16% and the Nasdaq Composite gained 119.50 points, or 0.51%.

Healthcare heavyweights UnitedHealth Group and Merck fell 2.8% and 3%, respectively, weighing on the Dow.

PRIVATE ECONOMIC DATA AWAITED

Private sector economic data, including Wednesday's private payrolls, will be closely watched this week, with the second-longest U.S. government shutdown contributing to data fog and monetary policy uncertainty.

Chicago Fed President Austan Goolsbee said on Monday he was in no rush to cut interest rates again with inflation at high levels, adding to recent hawkish commentary from other central bank officials following a 25-basis-point cut last week.

Traders are now pricing in a 70.3% chance of a 25-basis-point rate cut in December, lower than the 90% a week earlier, according to CME Group's FedWatch tool.

U.S. manufacturing contracted for an eighth consecutive month in October as new orders remained subdued, data showed.

Meanwhile, the U.S. Supreme Court is set to hear a case around the legality of Trump's tariffs on Wednesday.

IDEXX jumped 13% after raising its annual forecasts, among the biggest gainers on the S&P 500.

Declining issues outnumbered advancers by a 1.86-to-1 ratio on the NYSE and by a 1.88-to-1 ratio on the Nasdaq.

The S&P 500 posted 13 new 52-week highs and 29 new lows while the Nasdaq Composite recorded 60 new highs and 146 new lows.

(Reporting by Twesha Dikshit and Purvi Agarwal in Bengaluru; Editing by Krishna Chandra Eluri)