Big Tech Powers Stock Gains in Run-Up to Jobs Data: Markets Wrap

(Bloomberg) -- A renewed rally in tech giants extended this year’s surge in the S&P 500 to almost 10% ahead of Friday’s jobs report amid bets the Federal Reserve will pause its interest-rate hikes in June.

After a brief respite in the colossal advance of big tech fueled by the artificial-intelligence frenzy, the cohort is back in full force. Nvidia Corp. climbed over 5%, leading gains in the Nasdaq 100. Aside from the obsession for anything AI-related that drove megacaps up 17% in May, the industry also got a boost amid a slide in bond yields and better-than-estimated sales at Dell Technologies Inc.

After the closing bell, Broadcom Inc., one of the world’s biggest chipmakers, said that demand for gear that powers AI is helping fuel sales, but not enough to offset a broader post-pandemic slowdown. 

“One can rightly ask how many more ‘Mays’ we can have, where US big tech is almost the only place to find outsized positive equity returns anywhere in the world,” said Nicholas Colas, co-founder of DataTrek Research. “The old Keynesian saying that goes, ‘markets can remain irrational longer than you can stay solvent’ feels especially relevant in the current investment environment.”

The S&P 500 rose 1% on Thursday, reclaiming its 4,200 mark. A contrarian indicator from Bank of America Corp. that tracks Wall Street strategists’ average recommended allocation to stocks is the closest it has been to notching a “buy” signal in over six years.

‘Extremely Nimble’

To Matt Maley at Miller Tabak, no matter how bullish investors might be about the potential for AI, they should be prepared to weather corrections along the way.

“Investors will need to be quite careful, and extremely nimble, after these recent parabolic advances,” Maley said. “Sometimes, the deep corrections are long-lasting, like we saw after the dot-com bubble burst. Sometimes, they only last for a few weeks and are followed by new, very strong rallies that take the stocks even higher.”

The tech rebound also pushed C3.ai Inc. off its session lows, with the AI software firm paring a plunge of 24% by almost half.

A long-time Tesla Inc. bull poured water on investors’ hopes that the electric-vehicle maker’s shares can get a sizable lift from the AI hype. While it is “tempting to speak in platitudes about Tesla’s AI chops,” the stock’s direction will be dominated by the supply and demand of electric cars over the next 12 months, said Morgan Stanley analyst Adam Jonas.

Jobs, Fedspeak

Aside from the AI theme, traders also geared up for the monthly jobs report on Friday, with forecasters projecting a moderation in the pace of hiring that could potentially allow the Fed to pause its tightening policy in June.

Fed Bank of Philadelphia President Patrick Harker said “we should at least skip this meeting in terms of an increase. In an essay Thursday, his St. Louis counterpart James Bullard, said he believes interest rates are at the low end of what’s likely to be sufficiently restrictive to bring down inflation.

Meantime, the Treasury is considering postponing its regular three- and six-month bill auctions “tentatively” scheduled for next Monday if constraints around the statutory debt limit remain.

Senators scrambled Thursday to agree on a plan for swift consideration of the debt-limit deal forged by President Joe Biden and House Speaker Kevin McCarthy ahead of a June 5 deadline to avert a destabilizing default. 

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1% as of 4 p.m. New York time
• The Nasdaq 100 rose 1.3%
• The Dow Jones Industrial Average rose 0.5%
• The MSCI World index rose 1.1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.6%
• The euro rose 0.7% to $1.0762
• The British pound rose 0.7% to $1.2530
• The Japanese yen rose 0.4% to 138.82 per dollar

Cryptocurrencies

• Bitcoin fell 0.9% to $26,873.83
• Ether rose 0.2% to $1,869.82

Bonds

• The yield on 10-year Treasuries declined four basis points to 3.60%
• Germany’s 10-year yield declined three basis points to 2.25%
• Britain’s 10-year yield declined seven basis points to 4.12%

Commodities

• West Texas Intermediate crude rose 2.9% to $70.04 a barrel
• Gold futures rose 0.7% to $1,995.50 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Emily Graffeo, Vildana Hajric, Peyton Forte and Isabelle Lee.

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