NEW YORK — A rebound for Nvidia supported a weakened Wall Street on Tuesday.
The S&The P 500 rose 0.4%, nearing its all-time high from a week earlier, while the Nasdaq composite rose 1.3% for its first gain in four days. This strength came even as most stocks fell outside of Wall Street’s frenzy surrounding artificial intelligence technology.
The Dow Jones Industrial Average, which does not include Nvidia, lagged behind, falling 299 points, or 0.8%.
Nvidia climbed 6.8%, and without those gains the S&P500 would have fallen to a loss for the day. The chip company’s shares snapped a three-day losing streak, having lost nearly 13% in their worst period since 2022.
It’s just one stock, but Nvidia has the power to control the S&P500 around because it has become one of Wall Street’s largest and most influential companies.
Voracious demand for Nvidia’s chips powering artificial intelligence applications has been a big reason as the US stock market has recently reached records, as has the growth of the economy slows down under the weight of high interest rates. But the AI boom has been so frenzied that it has raised concerns about a possible stock market bubble and over-inflated expectations among investors.
The recent problems for Nvidia haven’t caused too many concerns, at least not yet. Part of that is because Nvidia’s 13% decline in three days was a drop compared to its 1,000% gain since the fall of 2022. Market watchers also hoped that more stocks would participate in the rising stock market instead of just Nvidia and a handful of AI winners.
That’s what happened Monday, as banks, oil companies and other stocks outside the AI boom rallied as Nvidia sank. But it could be a challenge for such stocks to continue to catch up to AI darlings, depending on how much further U.S. economic growth slows.
According to Michael Wilson and other strategists at Morgan Stanley, the focus in financial markets is starting to shift to growth and not just inflation and interest rates.
Pool Corp., a distributor of pool supplies, plunged 8% after it said construction of new pools is slowing due to “prudent consumer spending on expensive items” and cut its financial forecasts for the year.
It was the worst performer in the S&P500, but Pool wasn’t alone. Three of the four stocks in the index fell.
SolarEdge Technologies fell 20.6% after it said a customer who owes it $11.4 million has filed for bankruptcy, raising questions about how much the solar company can collect and when. Smaller companies in the Russell 2000 index also fell 0.4%.
By and large, sales are over retailers across the country have been up and down lately as companies emphasize how lower income customers are struggling to keep up with the ever-increasing prices. The job marketstill looks mostly solid though. A report on Tuesday also showed that confidence among US consumers fell this month, but not as much as economists expected.
High-income households appear to be doing better and are booking trips on cruise ships. Carnival rose 8.7% after raising its 2024 profit forecast. The cruise company said bookings for the remainder of the year are the best ever in terms of both price and occupancy. And next year’s bookings could be even better.
All in all, the S&The P500 rose 21.43 points to 5,469.30. The Dow Jones fell 299.05 to 39,112.16 and the Nasdaq index rose 220.84 to 17,717.65.
On the bond market, government bond yields remained relatively stable. The yield on the 10-year Treasury bond remained at 4.23%, where it was late Monday.
It has largely fallen since reaching 4.70% in late April, which has eased pressure on the stock market. Yields have fallen in hopes that inflation will slow enough to convince the Federal Reserve lowered its key interest rate later this year.
The Fed has kept the federal funds rate at its highest level in more than two decades, hoping to put just enough pressure on the economy to get it moving again. inflation under control. The hope on Wall Street is that the Fed will cut rates at just the right time. If we wait too long, the economic slowdown could turn into a recession. If it is too early, inflation could accelerate again.
Investors are eager for the first rate cut, with many traders betting it will happen in September. But stocks don’t always rise afterwards. Since 1974, the S&According to the Wells Fargo Investment Institute, the P500 fell about 20% on average in the 250 days after the first rate cut.
That’s because it matters why the Fed cuts rates. If this happens simply because inflation has slowed enough to push rates down, that could be good for stocks. But if cuts are made because the economy is heading towards a recession, things are different.
In foreign stock markets, indexes fell in much of Europe and rose in much of Asia.
___
AP writers Matt Ott and Zimo Zhong contributed.