NEW YORK: US stock indexes advanced on Wednesday, with the tech-heavy Nasdaq rising to a record high, as investors assessed corporate earnings as well as crucial data showing the economy maintained a steady pace of growth in the third quarter.
Shares of Alphabet, the first of the five “Magnificent Seven” megacap stocks due to report results this week, soared 5.4% after the company beat expectations for third-quarter revenue and profit on strength in its cloud business and YouTube ad sales.
However, chip stocks tumbled, weighed by dour forecasts from Advanced Micro Devices and Qorvo, which lost 9.6% and 27%, respectively.
Nvidia was down 1%, while an index of chip stocks fell 2.8%.
“The overall trend of AI is intact, but people are coming to the realization that the hardware piece is going to be a lot harder to make money in, so they’re taking some of the gains and using these imperfect earnings as an excuse to reposition things into the software space,” said Jamie Cox, managing partner for Harris Financial Group.
“Alphabet is going to absolutely dominate in this environment, and it’s showing.” In economic data, the US gross domestic product increased at a 2.8% annualized rate, according to the Commerce Department’s advance estimate of third-quarter GDP, slightly below economists’ forecast of 3.0% growth.
A separate report showed US private payrolls growth surged by a higher-than-expected 233,000 jobs in October.
“The GDP and ADP reports are consistent with the Fed making another interest-rate cut at their post-election decision next week, but a smaller quarter-percentage-point one,” said Bill Adams, chief economist for Comerica Bank.
The neck-and-neck race between US presidential candidates Kamala Harris and Donald Trump was also at the top of investors’ minds ahead of the Nov. 5 election.
Traders anticipate a 25-basis-point rate cut in the Federal Reserve’s November and December meetings.
Megacaps Microsoft and Meta Platforms rose 1.1% each, with both companies scheduled to report after the bell.
Given the significant role they played in Wall Street’s rally this year, megacaps will be the most closely watched in an earnings-packed week. Their results are expected to provide insight into whether heavy AI investment is translating into better company performances.
Visa leapt 3.9% to a record high, lifting the Dow, after its fourth-quarter profit beat estimates.
The Dow Jones Industrial Average rose 213.91 points, or 0.51%, to 42,446.96, the S&P 500 gained 16.74 points, or 0.29%, to 5,849.66 and the Nasdaq Composite gained 44.68 points, or 0.24%, to 18,756.66.
The Information Technology sector was the biggest sectoral decliner, while Alphabet’s gains lifted Communication Services to an all-time high.
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