AI Drives Tech Rally, Outweighing US Debt Concerns: Markets Wrap
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(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 while the tech-heavy Nasdaq 100 added after a bullish sales forecast from Nvidia Corp. ignited gains in the technology sector.
Shares of Nvidia soared after the company’s forecast related to AI 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.
“Between the debt ceiling and AI, everything else is kind of dwarfed by the magnitude of those two things,” said Louise Goudy Willmering, partner at Crewe Advisors LLC, by phone.
Treasury-bill yields slated to mature early next month 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.”
In corporate news, Dish Network Corp. gained on a report of talks to offer mobile plans on Amazon. And Snowflake Inc. dropped after the cloud-software company cut its product revenue guidance for the full year.
Elsewhere 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, traders added to bets the Bank of England will keep raising interest rates after an unexpectedly strong reading of UK inflation on Wednesday. Money markets are now pricing more than 100 basis points of additional tightening by December. The Europe Stoxx 600 ended the day 0.3% lower.
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 0.9% as of 1:49 p.m. New York time
- The Nasdaq 100 rose 2.5%
- The Dow Jones Industrial Average fell 0.1%
- The MSCI World index fell 1%
Currencies
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.2% to $1.0726
- The British pound fell 0.3% to $1.2326
- The Japanese yen fell 0.3% to 139.92 per dollar
Cryptocurrencies
- Bitcoin fell 0.2% to $26,353.9
- Ether was little changed at $1,804.41
Bonds
- The yield on 10-year Treasuries advanced five basis points to 3.79%
- Germany’s 10-year yield advanced five basis points to 2.52%
- Britain’s 10-year yield advanced 16 basis points to 4.37%
Commodities
- West Texas Intermediate crude fell 3.6% to $71.63 a barrel
- Gold futures fell 1% to $1,963 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Georgina McKay.
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