Published: Thursday, May 23, 2024
NEW YORK – In late morning trading, the S&P 500 rose 0.1%. As of 10:30 am, the Nasdaq Composite was up 0.6% due to tech stock rallies. Dow Jones Industrial Average, a market that places less emphasis on technology, lagged behind the market, falling 280 points or 0.7%.
Nvidia’s shares soared by 9.5% on Thursday after it released its latest blowout profit report. The company’s latest quarterly revenue grew 262% from the previous quarter, while its profit soared a staggering 629%. The company’s chips are helping to train artificial-intelligence systems, and demand for them has been voracious.
Nvidia increased its dividends as well, with its CEO Jensen Huang announcing that “the next industrial Revolution has begun.”
There is growing concern that Wall Street’s frenzy over AI’s potential has created a bubble, where prices have skyrocketed too high and expectations are too high. The continued growth of Nvidia, one of Wall Street’s most influential stocks has helped to lift other stocks even further.
Super Micro Computer, a company that sells servers and storage systems for AI and other computing applications, rose by 4.4%.
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News Corp. rose 1.4% following its announcement that it would bring content from The Wall Street Journal and New York Post, as well as other news businesses, to OpenAI.
The majority of Wall Street stocks fell as rising bond yields weighed heavily on them. The reports that the U.S. economic growth remains strong caused traders to reconsider their bets on when the Federal Reserve would lower interest rates.
The Fed has to achieve the impossible feat of slowing down the economy just enough to bring inflation under control, but not too much to cause a recession. Wall Street wants to see some relief from the Fed’s main interest rate, which has been at its highest level for more than 20 years.
After traders had already lowered their too-optimistic predictions, a hotter economy than expected could force the Federal Reserve into waiting longer before reducing interest rates. It could even force the Federal Reserve into a deeper recession and higher rates to bring inflation down.
There is still hope for at least a rate cut this year. The traders have retracted some of their bets following a preliminary report released on Thursday, which suggested that the growth in U.S. economic activity was at its highest level in over two years. S&P Global’s report said that growth was improving for both the manufacturing sector and services sectors.
Separately, another report showed that the U.S. employment market is still strong despite high rates of interest. Last week, fewer workers than expected applied for unemployment benefits. This indicates that layoffs are still relatively low.
Treasury yields were almost flat after the unemployment report but immediately after the business report they began to rise.
The 10-year Treasury yield rose from 4.43% to 4.49% late on Wednesday. The yield on the two-year Treasury, which is more closely tied to expectations of Federal Reserve action, rose from 4.87% to 4.94%.
Interest rates are high, and this has affected everything from auto loans to credit card payments. Tougher mortgage interest rates also hurt. A report released on Thursday revealed that sales of new homes fell more than expected last month.
Lennar and PulteGroup, two homebuilders, both fell by 1.4%.
Stocks in utilities and real estate also fell sharply. Bonds pay more interest when interest rates are high. This can cause some investors to turn away from utilities and real estate investment trusts, which are known for their high dividends.
American Water Works and Alexandria Real Estate Equities both fell 2.7%.
Live Nation Entertainment fell 4.9% after the Justice Department accused the company and its Ticketmaster division of operating an illegal monopoly on live events in the United States.
Stock markets in Europe and Asia were mixed. Japan’s Nikkei 225 rose 1.3% in part on strength for semiconductor-related companies following Nvidia’s powerful profit report. Indexes in Hong Kong and Shanghai fell by 1.3% and 1.7% respectively amid concerns about the effectiveness of a new flurry policies to aid China’s struggling property sector.
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