(Nov 20): US stocks soared on Thursday after stronger-than-expected quarterly earnings from Nvidia Corp eased fears that artificial intelligence (AI) stocks may have become overvalued.
The S&P 500 Index jumped 1.6% as of 9.40am in New York, putting it on track for its biggest jump in nearly six months. The technology-heavy Nasdaq 100 Index advanced 1.9%, powered by Nvidia’s 3.5% rally after the world’s most valuable company delivered a surprisingly strong revenue forecast. A basket tracking the Magnificent Seven stocks rose 2.3%. Most megacap stocks advanced, with Alphabet and Meta Platforms gaining 2.5% and 1.7%, respectively.
Among other stocks, Walmart climbed 2.8% after increasing its outlook for sales in the full year, a sign the world’s biggest retailer is winning over price-sensitive shoppers. Target and Macy’s rose. The Philadelphia Stock Exchange Semiconductor Index, which houses Advanced Micro Devices, Broadcom and Marvell Technology, rallied 2.8% after Nvidia’s quarterly update eased concerns around the sector. And cloud-computing players such as CoreWeave soared 11%.
The Cboe Volatility Index, the market’s so-called fear gauge, dropped to 19.6 — below the key 20 level that causes concern for traders.
Thursday also brought the release of a long-delayed government employment report, which showed that US job growth picked up in September while the unemployment rate ticked higher. The data suggested the labour market showed signs of stabilising before the government shutdown. The figures come a day after minutes from the Federal Reserve’s last policy meeting showed a divided committee on whether to cut interest rates again
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Chip stocks rally after Nvidia earnings
“The one-two punch of a stellar Nvidia earnings report last night and a better-than-expected September jobs report this morning should give the market a boost, given that it directly addresses the two biggest concerns of the bears: an AI bubble and a moribund economy,” wrote Chris Zaccarelli, chief investment officer at Northlight Asset Management.
This will be the last jobs report the Fed sees before its Dec 9-10 meeting, and traders have scaled back bets on a rate cut then. “A December cut remains possible given continued labour market softness as expressed by the unemployment rate,” wrote Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management.
See also: Tech stocks lead as rate-cut bets keep rally alive
The Labor Department said on Wednesday that it won’t release a full jobs report for October because the government shutdown meant it couldn’t calculate the unemployment rate and some other key numbers. Separate data on Thursday showed applications for US unemployment benefits fell last week to 220,000, indicating that employers are largely still holding onto current workers despite economic uncertainty.
Elsewhere, Bath & Body Works shares sank 24% — heading for their worst day since March 2020 — after it cut its full-year adjusted earnings per share forecast, citing negative consumer sentiment. Meantime, Palo Alto Networks dropped 2.4% after the network security software company’s earnings and revenue forecast failed to impress investors.
Cipher Mining shares soared 13% after the Bitcoin miner and data-centre operator signed an additional AI hosting agreement with Fluidstack for added capacity at its Barber Lake site, with additional backstop from Google.
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