Wall Street’s main indexes climbed on Thursday, driven by gains in the tech-heavy Nasdaq, following data that pointed to a resilient U.S. economy. Meanwhile, shares of AI chipmaker Nvidia fell as its revenue forecast, while positive, did not meet the high expectations of investors.
A report from the Commerce Department revealed that the U.S. economy grew faster than initially estimated, bolstered by strong consumer spending. “Downward revisions to inflation accompanying an upward revision to spending build the case for a soft landing,” said Jeffrey Roach, chief economist at LPL Financial.
Market activity this week has been marked by fluctuations as investors awaited Nvidia’s results, eager to see if the company could maintain its extraordinary revenue growth.
Despite posting strong second-quarter results, Nvidia’s revenue forecast for the current quarter fell short of sky-high investor expectations, causing its shares to drop 3.2%.
“This is the first time there has been criticism of the estimates beat and the outlook raised. It is not as great as some investors had anticipated,” commented Peter Andersen, founder of Andersen Capital Management.
Semiconductor companies Broadcom and Advanced Micro Devices (AMD) gained 1.7% and 1.1%, respectively, contributing to a 1.6% increase in the Philadelphia SE Semiconductor Index.
Shares of Nvidia’s major tech clients, such as Microsoft, Meta, and Alphabet, all rose over 1.5% amid optimism about the integration of artificial intelligence to boost corporate profits.
Apple surged more than 2.4% after Citigroup named the iPhone maker its top AI stock pick, favouring it over Nvidia, which contributed to a 0.9% increase in the tech sector.
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By 11:45 a.m. ET, the Dow Jones Industrial Average had risen 289.54 points, or 0.70%, to 41,380.96. The S&P 500 increased by 39.02 points, or 0.70%, to 5,631.20, and the Nasdaq Composite climbed 182.80 points, or 1.04%, to 17,738.82.
Communication services led broader gains, with nine of the 11 sectors on the benchmark index trading higher.
“We’re kind of bouncing back from fears about Nvidia and having a relief rally,” said Jay Hatfield, portfolio manager at InfraCap.
The S&P 500 is now approximately 0.6% away from a record high, while the Dow has reached an all-time peak, as hopes for a September interest rate cut remain strong.
The likelihood of a 25 basis point reduction stands at 67.5%, while the odds of a more significant 50 basis point cut are at 32.5%, according to the CME Group’s Fed Watch Tool.
Adding to the positive sentiment, a Labor Department report showed that jobless claims were slightly lower than expected for the previous week. Investors are now eyeing Friday’s Personal Consumption Expenditures data for June for further clues on the Federal Reserve’s potential path for monetary policy easing.
In corporate news, cybersecurity firm CrowdStrike jumped 4.6% after exceeding quarterly revenue estimates, while Dollar General plummeted 28% after cutting its annual sales and profit forecasts.
On the New York Stock Exchange, advancing issues outnumbered decliners by a 2.66-to-1 ratio, and by a 2.22-to-1 ratio on the Nasdaq. The S&P index recorded 50 new 52-week highs and four new lows, while the Nasdaq recorded 65 new highs and 71 new lows.
