US Stocks Gain on AI Rally as Wall Street Braces for Crucial Fed Verdict and Big Tech Earnings Boost

US stocks climbed on Tuesday as a fresh surge in AI-related shares lifted Wall Street, with investors positioning for a crucial Federal Reserve interest-rate verdict and a high-stakes week for Big Tech earnings.

The Nasdaq Composite gained about 1.2% and the S&P 500 rose 0.6%, while the Dow Jones Industrial Average edged up by less than 0.1%. Most S&P 500 constituents fell, however, as gains in a small group of influential AI companies pulled the index higher.

AI Float Plans Help Power Wall Street

Investor interest in the sector was boosted by Anthropic's filing for a proposed initial public offering. The company submitted a registration statement to the US Securities and Exchange Commission on Monday, 26 October, outlining its business, financial performance and the risks linked to its operations and the development of AI technology.

Anthropic said the number of shares and the price range had not yet been determined, and that the registration statement had not become effective. The filing is not an offer to sell securities.

The filing was one of several influences on sentiment, alongside earnings and the approaching Fed decision. Its risk disclosures also underline that rapid growth in the industry does not guarantee future profitability, highlighting the uncertainty around future cash flows from fast-growing AI platforms.

The enthusiasm extended to Asia, where South Korea's Kospi index rose as investors responded to Wall Street's gains and renewed optimism about AI, according to Yonhap News Agency. Samsung Electronics and SK Hynix were among the stocks that advanced, reflecting renewed demand expectations for chips used in data centres and AI training.

Big Names Set the Earnings Tone

Coca-Cola reported better-than-expected third-quarter results on Tuesday. Revenue rose 7% to $13.4 billion (£10.07 billion) and comparable earnings per share increased 11% to $0.91 (£0.68). Global unit case volume grew 5%, and the company raised its full-year earnings outlook. Reuters reported that revenue and adjusted earnings exceeded analysts' forecasts, reinforcing the picture of steady demand for branded consumer goods.

SoFi Technologies also posted strong third-quarter figures. Adjusted net revenue climbed 44% to $1.4 billion (£1.05 billion), and adjusted earnings per share came in at $0.18 (£0.14). The company raised its full-year guidance, signalling confidence in its ability to grow lending and financial services activity into next year.

Attention now turns to Alphabet and Microsoft, which are due to report on Wednesday, 28 October. Alphabet will publish third-quarter results, while Microsoft will report for the first quarter of its 2027 fiscal year. Investors will be looking for updates on cloud computing growth, demand for AI and spending plans, with particular focus on how capital expenditure on data centres and AI infrastructure is feeding into revenue growth.

The results from the two companies are expected to set the tone for the rest of the reporting season among the largest technology groups, given their size in major indices and their role in the development and commercialisation of AI tools.

Fed Verdict Looms Over Markets

The Federal Reserve's policymaking committee began a two-day meeting on Tuesday. It is scheduled to publish its decision at 2pm Eastern Time on Wednesday, followed by a press conference with the Fed chair, Jerome Powell, at 2.30pm.

Financial markets broadly expect the Fed to leave interest rates unchanged, according to Reuters. The meeting comes amid concern about inflation and uncertainty over the path of borrowing costs as investors weigh how long policy will remain restrictive.

Markets could face renewed volatility if Powell signals greater concern about inflation than investors currently expect. Such a message could push bond yields higher and put pressure on highly valued AI-related shares, as well as on other growth stocks that are sensitive to changes in discount rates.

In the run-up to the decision, traders are also watching moves in Treasury yields and the dollar for clues about how investors are positioning around the central bank's announcement and any guidance on the outlook for policy into next year.