[New York Stock Market] Nvidia Surges Over 24%, Nasdaq Up 1.71%

The three major indices of the U.S. New York stock market closed mixed on the 25th (local time) as concerns over a federal government default approached within a week. The Nasdaq index rose by over 1.7% thanks to Nvidia's strong earnings outlook announced the previous day, while the Dow Jones Industrial Average showed a slight decline.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,764.65, down 35.27 points (0.11%) from the previous session. In contrast, the large-cap S&P 500 index rose 36.04 points (0.88%) to 4,151.28, and the tech-heavy Nasdaq index gained 213.93 points (1.71%) to close at 12,698.09.

Within the S&P 500, stocks related to technology, communications, real estate, industrials, and financials rose, while energy, healthcare, utilities, consumer staples and discretionary, and materials sectors declined. Notably, technology stocks surged over 4%, driven by the Nvidia effect.

Fueled by a surge in demand for AI semiconductors, Nvidia, which announced earnings guidance exceeding expectations, soared more than 24% from the previous close. Other tech stocks expanding AI investments, such as Microsoft and Google Alphabet, also recorded gains of 2-3%. Semiconductor stock AMD jumped over 11%, while Intel, included in the Dow index, slid more than 5%. Additionally, Best Buy rose over 3% despite expected demand slowdown, posting slightly better-than-expected earnings. Conversely, American Eagle and Snowflake plunged nearly 12% and 17%, respectively, due to weak earnings guidance.

[Image source=Reuters Yonhap News]

Investors are closely watching Nvidia's surge while monitoring political discussions on raising the debt ceiling and Fitch's warning of a U.S. sovereign credit rating downgrade. Ed Moya, senior market analyst at OANDA, said, "Everyone is moving while watching Nvidia," adding, "It's a welcome break from the Fed's tightening, debt ceiling negotiations, banking risks, and inflation." Keith Lerner, co-chief investment officer at Truist, commented, "We are seeing an extension of the existing trend following Nvidia's news," noting, "Winners continue to lead, and losers continue to incur losses."

Nvidia projected second-quarter revenue of $11 billion after the previous day's market close, exceeding market expectations by more than 50%. Following the much higher-than-expected guidance, Wall Street firms raised their price targets for Nvidia. JP Morgan, Evercore ISI, and Barclays all set targets at $500 per share. Considering the closing price of $379.81 on that day, this implies an additional upside potential of over 30%.

Evercore ISI analyst C.J. Muse said, "What else can you say besides 'wow'? I've never seen this pace before," and evaluated that "Nvidia will grow long-term." Barclays analyst Blaine Curtis stated, "The market is moving fast, and Nvidia is the only solution that can power the wave of large language models (LLM)."

Nvidia's rally immediately boosted investor sentiment, especially among technology and growth stocks. Daran Kremer, co-chief investment officer at Supertuity, said, "From a macro perspective, technological innovation can overcome the headwinds of economic slowdown and interest rate hikes," adding, "Technology and growth stocks are not dead."

Meanwhile, negotiations over raising the federal government's debt ceiling continue to face difficulties amid concerns that a default could occur as early as June 1. The previous day, international credit rating agency Fitch warned of a U.S. sovereign credit rating downgrade related to default risk, maintaining market caution.

Given the persistent differences between both sides, there are growing expectations that last-minute struggles will continue until just before the anticipated X-day of default. While the market believes the worst-case scenario of default will not materialize, it remains concerned about the uncertainty and repercussions leading up to that point. The Republican Party demands federal budget cuts as a precondition for raising the debt ceiling, while the White House insists on an unconditional increase.

However, some progress has reportedly been made as working-level negotiations continue. President Joe Biden, at the nomination event for the new Chairman of the Joint Chiefs of Staff, described negotiations with Republicans as productive and dismissed the possibility of default, saying, "There will be no default." White House Press Secretary Karine Jean-Pierre also stated at a briefing that "the negotiation team has had productive discussions," indicating "there is clearly a way forward."

The U.S. growth rate released on this day was revised upward from the initial estimate. According to the U.S. Department of Commerce, first-quarter gross domestic product (GDP) growth was recorded at an annualized rate of 1.3%. This preliminary figure was adjusted up by 0.2 percentage points from the previously announced flash estimate of 1.1% last month. Slight improvements in private inventories and consumer spending data contributed to the overall upward revision of GDP growth. However, local media assessed the result as still sluggish, considering the 2.6% growth rate in the fourth quarter of last year.

Weekly initial jobless claims rose by 4,000 to 229,000, falling short of Wall Street's forecast of 245,000. The Chicago Federal Reserve Bank's April National Activity Index was 0.07, marking a positive reading for the first time in three months, indicating an expansion in the U.S. economy. The following day, the release of the April Personal Consumption Expenditures (PCE) price index, a key inflation gauge monitored by the Fed, is scheduled. The core PCE for April is expected to rise 4.5% year-over-year and 0.3% month-over-month.

In the New York bond market, Treasury yields rose. The 10-year U.S. Treasury yield stood around 3.81%, while the 2-year Treasury yield, sensitive to monetary policy, was near 4.53%. The dollar index, which measures the value of the U.S. dollar against six major currencies, rose more than 0.4% to 104.3.

International oil prices fell for the first time in four trading days as the possibility of additional production cuts by the Organization of the Petroleum Exporting Countries Plus (OPEC+) diminished. On the New York Mercantile Exchange, July delivery West Texas Intermediate (WTI) crude oil closed at $71.83 per barrel, down $2.51 (3.38%) from the previous session.

This content was produced with the assistance of AI translation services.