US STOCKS-S&P 500, Nasdaq reach all-time closing highs on AI dealmaking boost

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AMD soars after OpenAI deal

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Tesla up as company teases Tuesday event

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Crypto companies gain as bitcoin breaches $125k

(Updates to market close)

By Stephen Culp

NEW YORK, Oct 6 (Reuters) - The S&P 500 and the Nasdaq advanced on Monday, as artificial intelligence-related dealmaking boosted investor sentiment even as the U.S. government shutdown extended through its sixth day.

The Nasdaq and the S&P 500 reached record closing highs, while the blue-chip Dow inched lower.

Chips took the lead after AMD said it would supply AI chips to OpenAI in a deal that could generate tens of billions of dollars in yearly revenue and would allow the ChatGPT creator to buy a stake of up to 10% in the chipmaker.

AMD surged, pushing the broader Philadelphia Semiconductor Index higher.

"The market is seeing some strength in areas like technology and consumer discretionary and it's flying in the face of the government shutdown," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "The market is still interested in the AI trade and the companies that support and use it."

"It's a wave and waves don't go on forever; it will eventually crest and decline," Pavlik added. "But where are we this cycle of the wave? It's impossible to know."

The federal government remained shuttered for the sixth day as lawmakers idled in a partisan impasse. The shutdown has postponed the release of key economic indicators, forcing investors to rely on secondary, non-government data to gauge the timing and extent of Federal Reserve interest rate cuts.

Monetary policymakers have cautioned against rushing to lower the Federal Funds target rate as inflation remains high, while others believe signs of softness in the labor market merit rate cuts.

Financial markets have priced in an all-but-certain 94.6% chance of a 25 basis point interest rate reduction at the conclusion of the Fed's October meeting.

Without new U.S. government data this week, market participants are monitoring reports on outstanding consumer credit, mortgage demand and the University of Michigan's preliminary take on October consumer sentiment.

According to preliminary data, the S&P 500 gained 24.52 points, or 0.37%, to end at 6,740.31 points, while the Nasdaq Composite gained 160.69 points, or 0.71%, to 22,941.19. The Dow Jones Industrial Average fell 63.19 points, or 0.14%, to 46,695.50.

Next week, third-quarter earnings will provide market catalysts as the reporting season gets underway with results from large U.S. banks.

Analysts estimate aggregate year-on-year S&P 500 earnings growth of 8.8% for the July-to-September period, up 0.8 percentage points from projections at the beginning of the third quarter, according to LSEG data.

Tesla advanced after the electric carmaker teased an event scheduled for Tuesday on social media platform X over the weekend.

TD Cowen cut its Starbucks (SBUX) price target, citing a weakening labor market affecting Generation Z, sending the coffee chain's shares lower.

Bitcoin breached the $125,000 mark on Sunday, sending crypto-related firms Coinbase, Strategy, Riot Platforms (RIOT) and MARA Holdings (MARA) higher. Regional bank Comerica (CMA) jumped after Fifth Third said it will buy the company in an all-stock deal valued at $10.9 billion.

Verizon shares dipped after the telecommunications company named former PayPal boss Dan Schulman as its new chief executive officer. (Reporting by Stephen Culp; Additional Reporting by Niket Nishant and Sukriti Gupta in Bengaluru; Editing by Richard Chang)