NEW YORK: The tech-heavy Nasdaq led Wall Street’s main indexes higher on Thursday after data showed a still robust US economy, while AI chip firm Nvidia slipped as its largely in-line forecast failed to meet lofty expectations of investors.
A Commerce Department report showed the US economy grew faster than initial estimates, amid strong consumer spending.
“Downward revisions to inflation accompanying an upward revision to spending builds the case for a soft landing,” Jeffrey Roach, chief economist for LPL Financial, said.
Markets have swung between marginal gains and losses this week in the run-up to Nvidia’s results, as traders waited to see if the company would sustain its unmatched revenue growth.
Nvidia’s largely in-line revenue forecast for the current quarter disappointed investors, despite upbeat second-quarter results. The chip bellwether’s shares were down 3.2%.
“This is the first time that there has been criticism of the estimates beat and the outlook raise. It is not as great as some investors had anticipated,” said Peter Andersen, founder of Andersen Capital Management.
Semiconductor peers Broadcom and Advanced Micro Devices rose 1.7% and 1.1%, respectively, aiding a 1.6% rise in the Philadelphia SE Semiconductor index.
Nvidia’s heavyweight megacap customers, which have been the focus of market euphoria on the prospect of artificial intelligence integration boosting corporate profits, also rose with Microsoft, Meta and Alphabet up more than 1.5% each.
Apple gained more than 2.4% after Citigroup selected the iPhone maker as its top AI pick over Nvidia. This helped the tech sector gain 0.9%.
At 11:45 a.m. ET, the Dow Jones Industrial Average was up 289.54 points, or 0.70%, at 41,380.96, the S&P 500 was up 39.02 points, or 0.70%, at 5,631.20, and the Nasdaq Composite was up 182.80 points, or 1.04%, at 17,738.82.
Communication services led broader gains, with nine out of 11 sectors trading higher on the benchmark index.
“We’re kind of bouncing back from fears about Nvidia and having a relief rally,” said Jay Hatfield, portfolio manager at InfraCap.
The benchmark S&P 500 is about 0.6% away from a record high, while the Dow was at an all-time peak, as expectations for a September interest rate cut stayed robust.
Odds of a reduction of 25 basis points in September stand at 67.5%, while those of a larger 50 bps cut are at 32.5%, according to CME Group’s Fed Watch Tool.
A Labor Department report showed jobless claims were marginally lower than expected for the previous week.
Friday’s Personal Consumption Expenditures data for June, could offer hints on the central bank’s monetary policy easing trajectory.
CrowdStrike gained 4.6% after the cybersecurity company beat quarterly revenue estimates, while Dollar General slumped 28% after slashing its annual sales and profit forecasts.