By Noel Randewich and Shristi Achar A
(Reuters) - The Nasdaq closed sharply higher on Monday as Tesla surged on optimism around artificial intelligence and investors awaited inflation data due later this week.
Tesla rallied 10% after Morgan Stanley upgraded the electric car maker to "overweight" from "equal-weight," saying its Dojo supercomputer could boost the company's market value by nearly $600 billion.
Other megacaps also rose, with Amazon climbing 3.5% and Microsoft adding 1.1%.
Meta Platforms jumped 3.25% after a report on Sunday said the social media platform was working on a new, more powerful AI system.
Walt Disney added 1.2% and Charter Communications rose 3.2% after they reached a deal for Disney's programming, including ESPN, to return to the Spectrum cable service just hours ahead of the start of NFL "Monday Night Football."
Investors are looking to August consumer price index data due on Wednesday for clues about how close the Federal Reserve may be to ending its campaign of interest rate hikes. That will be followed by producer price data on Thursday.
A New York Fed survey showed Americans' overall views on inflation were little changed in August, as they predicted rising costs for homes and food, while expecting bleaker personal financial health.
"What we're seeing is a lot of positive sentiment that is really tied to bullishness around the likely CPI and PPI numbers being more in line with moderation," said Greg Bassuk, chief executive officer of AXS Investments in New York.
"As long as the inflation numbers for August come in within the band of expectations, we're going to see the Fed move away from additional rate hikes."
Wall Street logged weekly losses on Friday after a recent uptick in oil prices and stronger-than-expected economic data fueled concerns of sticky inflation and interest rates staying higher for longer.
Traders see a 93% chance that the central bank will hold its interest rates at current levels at its September meeting, while chances of a pause in November stand at 57%, according to the CME FedWatch Tool.
Fed officials have entered a blackout period, during which they usually do not make public comments, until the policy decision outcome on Sept. 20.
The S&P 500 climbed 0.67% to end at 4,487.46 points.
The Nasdaq gained 1.14% at 13,917.89 points, while Dow Jones Industrial Average rose 0.25% to 34,663.72 points.
Volume on U.S. exchanges was relatively light, with 9.3 billion shares traded, compared to an average of 10.0 billion shares over the previous 20 sessions.
Of the 11 S&P 500 sector indexes, nine rose, led by consumer discretionary, up 2.77%, followed by a 1.17% gain in communication services.
Qualcomm advanced 3.9% after the chipmaker signed a new deal with Apple to supply 5G chips to the iPhone maker until at least 2026.
Hostess Brands surged 19.1% after J. M. Smucker said it would buy the Twinkies-maker in a $5.6 billion deal.
Advancing issues outnumbered falling ones within the S&P 500 by a 1.5-to-one ratio.
The S&P 500 posted 14 new highs and 11 new lows; the Nasdaq recorded 36 new highs and 199 new lows.
(Reporting by Ankika Biswas, Shreyashi Sanyal and Shubham Batra in Bengaluru, and by Noel Randewich in Oakland, Calif; Editing by Arun Koyyur, Vinay Dwivedi and Richard Chang)