Explosive Profits for Chip Makers Nvidia US stocks rose Thursday as fears of a debt ceiling deal and rising interest rates faded.
The Wall Street tech-heavy Nasdaq Composite rose 1.7%, while the benchmark S&P 500 rose 0.9%, rebounding from early-week declines.
Both were helped by Nvidia’s 24.4% gain, boosting the company’s market capitalization by $184 billion.of the group Quarterly earnings Wednesday’s sales far beat analyst expectations due to a surge in demand for chips used in generative artificial intelligence systems. Microsoft and Alphabet, which are heavily involved in AI development, rose 3.8% and 2.2%, respectively.
ASML, Europe’s largest tech company, rose nearly 5%, while BE Semiconductor rose 7.6%. In Asia, South Korea’s SK Hynix jumped 5.9%.
In the U.S., investors increasingly expect the Federal Reserve to raise rates again this year, pushing yields on two-year Treasury bonds to their highest level since March’s banking turmoil. The revision was prompted by lower-than-expected unemployment claims and an upward revision to first-quarter gross domestic product (GDP) data.
Two-year bond yields rose 0.15 percentage points to 4.5%. Yields on 10-year bonds rose 0.08 percentage points to 3.8%, the highest since March 10. In the futures market, traders are pricing in another 0.25 percentage point rate hike by July.
Expectations of higher interest rates usually hurt stocks, with tech stocks often seen as more sensitive.
U.S. Republican negotiators said on Thursday that some progress had been made on the debt ceiling talks, although no deal had yet been reached.
Yields on Treasury bills, which expire on June 6, near the date the U.S. government is expected to run out of money, had hit a 7.5% high the day before, according to Tradeweb pricing. It was trading at 6.8% on Thursday.
Rating agency Fitch Signaled It said it could cut the U.S. credit rating and put its triple-A rating on negative watch, citing “increasing political partisan conflict that is preventing a resolution” on the debt ceiling.
The last time Fitch put the US on negative watch was in October 2013, two days before the so-called X-date of that year, when government funding was expected to dry up during debt ceiling negotiations in Washington.
In the UK, gold fell again on Wednesday after data showed inflation fell to 8.7% in April, but the drop was much smaller than expected by the Bank of England.
Two-year bond yields rose 0.17 percentage points to 4.5%. Yields were below 4% at the end of last week.
Yields on 10-year bonds also rose 0.16 percentage points to 4.36%, close to the level seen in October 2022 when interest rates rose. Prime Minister Kwasi Kwarten’s ‘mini’ budget threw the financial markets into turmoil.
Traders have raised their forecasts for UK interest rates to peak at 5.5% by the end of the year, up from 4.9% just a week ago.
“In the UK, there is continuing anxiety related to inflation getting out of control.” [ . . . ] There is some concern about the ability of central banks to deal with it,” said Joel Kruger, market strategist at LMAX Group.
London’s FTSE 100 index fell 0.7% on Thursday, the biggest drop among major European markets.
In Asia, Hong Kong’s Hang Seng Index fell 1.9%, while China’s benchmark CSI300 Index fell 0.2%. Japan’s TOPIX fell 0.3%.
https://www.ft.com/content/4d44ec91-2e16-4649-92a4-15669469767f Wall Street stocks rise after Nvidia’s explosive performance