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U.S. stocks were trading mostly higher on Thursday as Nvidia Corp.’s earnings report sent shares of the chip maker soaring and the broader Nasdaq along with it, while the Dow Jones Industrial Average was lower and looked set to fall for a fifth straight session as talks to lift the U.S. debt ceiling drag on in Congress.
Price action
-
The Dow DJIA
DJIA,
-0.35%
fell by 77 points, or 0.3%, to 32,713. -
The S&P 500
SPX,
+0.67%
rose 21 points, or 0.5%, to 4,135. -
The Nasdaq Composite
COMP,
+1.59%
jumped 149 points, or 1.2%, to 12,635.
On Wednesday, the Dow fell for a fourth straight ession as debt-ceiling worries continued to hang over the market.
What’s driving markets
Fears about the looming U.S. debt-ceiling deadline were offset Thursday by excitement about the prospects for artificial-intelligence technology after chip maker Nvidia’s results late Wednesday, resulting in a stark bifurcation between the Nasdaq and the Dow. Nvidia
NVDA,
shares surged 25%.
Depending on where Nvidia finishes Thursday’s session, the chip-maker could add more than $200 billion to its market capitalization, according to Dow Jones Market Data. It was also on the cusp of joining a small club of companies worth more than $1 trillion, while its gains also helped boost shares of related firms.
“It’s the Nvidia effect,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott, during a phone interview. “As if these AI companies needed another event to spur interest.”
Shares of CS.ai Inc. AI and Advanced Micro Devices Inc. AMD were among those bathing in Nvidia’s AI glow early Thursday.
As the Nasdaq jumped, the Dow, a gauge arguably more sensitive to broader economic conditions, continued to drag as debt-ceiling talks loomed over markets.
Ructions at the short end of the Treasury market — where some 1-month bill yields
TMUBMUSD01Y,
broke above 7% — illustrate trader anxiety that unless Congress can reach an agreement to extend the debt-ceiling the U.S. government may technically default at the beginning of June.
“The prospect of the U.S. government being unable to meet its financial obligations continues to be a key influence on investor sentiment in global equity markets,” said Derren Nathan, head of equity research at Hargreaves Lansdown.
Yields have also been climbing on the long end of the Treasury curve, with the 10-year note
TMUBMUSD10Y,
up 4 basis points at 3.751%. Typically higher yields are bad news for stocks, but only the Dow has struggled in recent weeks as a rally in shares of megacap technology companies has supported the S&P 500 and Nasdaq.
Ratings agency Fitch late Wednesday said it was placing the U.S. AAA credit rating on watch for a possible downgrade given what it termed the debt ceiling “brinkmanship”.
The optimism over semiconductors bade well for the wider tech sector, according to Mark Newton, head of technical strategy at Fundstrat: “Semis in relative terms to broader technology, have the potential to break back out to new all-time highs this week on a ratio basis. That would be important and positive for this leading sector to show such strength.”
Investors digested weekly jobless claims data and an updated reading on first-quarter gross domestic product. Initial jobless claims, seen as a proxy for layoffs, reached a seasonally adjusted 229,000 last week, according to data released by the Labor Department.
Meanwhile, GDP data showed the U.S. grew at a somewhat faster but still tepid 1.3% annual pace in the first quarter, updated figures show, as high inflation and rising interest rates weighed on the economy.
Outside the U.S., Germany released data showing its economy entered a recession during the first quarter.
Several Federal Reserve officials were due to speak Thursday after the central bank released minutes from its latest meeting on Wednesday. Investors will be watching to see what they say about the urgency for another interest-rate hike as the likelihood of a move in June has continued to climb, according to Fed funds futures.
Richmond Fed President Tom Barkin will speak at 9:50 a.m. ET and Boston Fed President Susan Collins is set to speak at 10:30 a.m.
Companies in focus
-
Palo Alto Networks Inc.
PANW,
+0.10% ,
Applied Materials Inc.
AMAT,
+5.52%
and Synopsys Inc
SNPS,
+10.20%
shares were up sharply, benefiting from the AI-inspired optimism. -
Snowflake Inc.
SNOW,
-17.99%
plunged after the data-software company topped expectations with its latest results but cut its outlook for the full year. -
American Eagle Outfitters Inc.
AEO,
-14.21%
fell sharply after the clothing chain forecast a “low-single digits” sales decline for the second quarter, amid “ongoing macro challenges” that have led to subdued clothing demand. -
Best Buy Co. Inc.
BBY,
+1.04%
leapt after the electronics retailer reported fiscal first-quarter profit that beat expectations but fell a bit shy on revenue, while maintaining its full-year outlook. -
Dollar Tree Inc.
DLTR,
-12.72%
took a dive after the discount retailer missed fiscal first-quarter profit expectations and cut its full-year outlook, as elevated shrink and a shift in buying patterns to consumables weighed on results.
