US Stock Markets Rally on Nvidia's AI-Driven Gains and Corporate Earnings
US stock indices moved significantly higher on Wednesday, with the market's momentum largely fueled by substantial gains in Nvidia, the most influential stock on Wall Street. The S&P 500 index rose by 0.9%, bringing it within 1.1% of its all-time high set in late last month. The Dow Jones Industrial Average increased by 308 points, or 0.6%, as of 12:21 p.m. Eastern time, while the Nasdaq composite index climbed 1.3%.
Nvidia and Meta Partnership Boosts AI Optimism
Nvidia's stock jumped 2.3% following an announcement by Meta Platforms regarding a long-term partnership. Under this agreement, Meta will utilize millions of Nvidia chips and related equipment for its artificial intelligence data centers, as reported by AP. Nvidia CEO Jensen Huang emphasized the scale of the deployment, stating, "No one deploys AI at Meta's scale." As the most valuable company on Wall Street, Nvidia's rise served as the primary force lifting the S&P 500 index.
This rally highlighted the strong upside that AI development continues to provide for US equities. However, recent trading sessions have experienced sharp swings as investors carefully weigh the potential risks associated with heavy spending on AI technologies. There is growing caution among investors about the substantial investments companies like Meta are making in artificial intelligence and whether these large outlays will ultimately translate into higher profits and improved productivity. Meta's stock initially fell as much as 1.7% earlier in the session before rebounding to post a 0.3% gain.
Positive Earnings Reports Extend Strong Reporting Season
Several corporate earnings reports contributed to the positive momentum, extending what has been a robust reporting season for major S&P 500 companies. Cadence Design Systems surged 9.1% after reporting quarterly profit and revenue that exceeded analysts' expectations. Analog Devices rose 2.7% after also topping estimates for both profit and revenue. The chipmaker noted that it recorded record orders for its data center business during the quarter.
Outside of earnings, Moderna gained 5.5% after announcing that the Food and Drug Administration will review its flu vaccine candidate, following an earlier refusal to consider it.
Bond Market and Federal Reserve Outlook
In the bond market, Treasury yields ticked higher ahead of the release of minutes from the Federal Reserve's latest policy meeting. The yield on the 10-year Treasury rose to 4.07% from 4.05% late Tuesday. The Fed has paused its interest rate cuts, though many investors anticipate reductions to resume later this year. Details in the meeting minutes could influence expectations about the timing, with widespread bets pointing to the summer, when a new Fed chair is scheduled to take office.
Global Market Movements
In Europe, London's FTSE 100 climbed 1.3% after fresh UK inflation data strengthened expectations that the Bank of England could soon cut interest rates. In Asia, Japan's Nikkei 225 rose 1% after Prime Minister Sanae Takaichi was reappointed by parliament following a landslide victory for her ruling Liberal Democrats in the February 8 election. Investors expect her to push policies aimed at supporting the economy and markets. Several other Asian markets were closed for the Lunar New Year holiday.
