US stocks rose Thursday as a rally in companies linked to the frenzy in artificial intelligence outweighed broader market concerns including a US debt default.
(Bloomberg) — US stocks rose Thursday as a rally in companies linked to the frenzy in artificial intelligence outweighed broader market concerns including a US debt default.
The S&P 500 gained 0.7% while the tech-heavy Nasdaq 100 added 2.3% after a bullish sales forecast from Nvidia Corp. ignited gains in the technolgy sector.
Shares of Nvidia soared 27% after the company’s forecast related to AI demand surprised even the most optimistic analysts on Wall Street, propelling the company to the cusp of a $1 trillion market value.
It’s another sign that investors are willing to pile into promising tech stocks, despite the growing worries about China’s economy and a potentially catastrophic US debt default. Fitch Ratings warned that the US’s AAA rating is under threat, though it still expects politicians will reach an agreement before time runs out.
“While we recognize the euphoria with artificial intelligence, it’s important for investors to stay grounded and avoid putting money into overvalued stocks in this space, even if they are strong companies,” wrote Ryan Belanger, founder and managing principal at Claro Advisors.
Treasury-bill yields slated to mature early next month all edged higher as investors continued to demand a premium on securities seen most at risk of non-payment if the government exhausts its borrowing capacity. The wrangling in Washington adds to the risks assessed by Federal Reserve officials as they consider pausing interest rate increases.
Traders are now fully pricing in another quarter-point hike within the next two policy meetings after mixed data Thursday, including a higher revised first-quarter GDP and fewer-than-expected jobless claims.
Read more: Nvidia Forecast Shows How AI Frenzy Is Transforming Chip Sector
“Nvidia was last night’s good surprise,” said Gilles Guibout, head of European equity strategies at Axa Investment Managers. “But more broadly, there are few reasons for the market to keep rising: interest rates are not going down, global economic growth isn’t rebounding, full-year earnings are seen flat and stock valuations are already at a decent level.”
The company, whose shares have doubled this year, is at the forefront of an explosion in spending on artificial intelligence computing following the success of ChatGPT and other tools.
“If you look at tech it continues to reinvent itself over and over,” Larry Adam, chief investment officer at Raymond James Financial Inc, said in an interview on Bloomberg Television. “I continue to like the big tech names.”
Elsewhere, Dish Network Corp. gained 8.8% on a report of talks to offer mobile plans on Amazon. Snowflake Inc. dropped 18% after the cloud-software company cut its product revenue guidance for the full year. And in Asian markets, sentiment continued to worsen. The Hang Seng Index shed 1.9% on the day and the yuan broke through the closely-watched 7-per-dollar level.
The key worry for investors is that China’s economy is losing momentum and there are persistent financial troubles in the real estate industry. Recent data suggest gross domestic product growth this year will be closer to the government’s target of about 5%, contrary to expectations of a large overshoot formed earlier in the year.
Meanwhile, UK government bonds led losses in Europe. Traders added to bets the Bank of England will keep raising interest rates after an unexpectedly strong reading of UK inflation Wednesday. Money markets are now pricing more than 100 basis points of additional tightening by December.
Key events this week:
- Interest rate decisions in Turkey, South Africa, Indonesia, South Korea, Thursday
- Tokyo CPI, Friday
- US consumer income, wholesale inventories, durable goods, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.8% as of 11:11 a.m. New York time
- The Nasdaq 100 rose 2.3%
- The Dow Jones Industrial Average fell 0.1%
- The Stoxx Europe 600 fell 0.1%
- The MSCI World index fell 1%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.0729
- The British pound fell 0.2% to $1.2339
- The Japanese yen fell 0.2% to 139.80 per dollar
Cryptocurrencies
- Bitcoin fell 0.2% to $26,355.35
- Ether fell 0.4% to $1,798.38
Bonds
- The yield on 10-year Treasuries advanced four basis points to 3.78%
- Germany’s 10-year yield advanced one basis point to 2.49%
- Britain’s 10-year yield advanced 15 basis points to 4.36%
Commodities
- West Texas Intermediate crude fell 2.3% to $72.63 a barrel
- Gold futures fell 1% to $1,963.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Georgina McKay.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.