Economic strength lifts Wall Street; Nvidia faces decline

Wall Street rallies: Wall Street's major indices rose on Thursday, buoyed by data indicating robust economic growth in the US, although Nvidia saw a dip after its forecast fell short of high investor expectations.

A report from the Commerce Department revealed that the US economy grew faster than initially estimated, driven by strong consumer spending.

"The economy isn't heading towards a recession soon, which is favourable for the stock market, especially with a likely rate cut coming in September," said Robert Pavlik, Senior Portfolio Manager at Dakota Wealth.

Nvidia forecast disappoints

In anticipation of Nvidia’s results, the markets experienced minor fluctuations, with investors keenly awaiting the company's performance to see if it would maintain its exceptional revenue growth.

Nvidia’s forecast for the current quarter matched expectations but did not exceed the high anticipations set by investors. This led to a 2.0 per cent drop in Nvidia’s shares.

“This is the first instance where there’s been criticism of Nvidia’s earnings beat and outlook raise. The results are not as impressive as some had hoped,” noted Peter Andersen, Founder of Andersen Capital Management.

“There might be early signs of a slowdown in Nvidia’s capital expenditure on artificial intelligence.”

Semiconductor stocks surge

Despite Nvidia’s decline, semiconductor companies like Broadcom and Advanced Micro Devices saw gains of 1.7 per cent and 0.9 per cent, respectively, contributing to a 1.2 per cent rise in the Philadelphia SE Semiconductor Index.

Major Nvidia clients, which have been central to market excitement over AI's impact on corporate profits, also saw gains, with Microsoft, Meta, and Alphabet all rising over 0.9 per cent.

Apple gained more than 2 per cent after Citigroup chose it as their top AI pick over Nvidia. This contributed to a 0.9 per cent rise in the tech sector.

By 9:48 am ET, the Dow Jones Industrial Average was up 41.92 points (0.10 per cent) at 41,133.34, the S&P 500 was up 20.41 points (0.36 per cent) at 5,612.59, and the Nasdaq Composite was up 156.60 points (0.89 per cent) at 17,712.62.

The S&P 500 is nearing a record high, and the Dow is close to its peak, with strong expectations for a rate cut in September. The probability of a 25 basis points reduction stands at 67.5 per cent, while a 50 basis points cut is at 32.5 per cent, according to CME Group's Fed Watch Tool.

Jobless claims dip

A Labour Department report showed jobless claims were slightly lower than anticipated for the previous week.

Friday's Personal Consumption Expenditure data for July might provide further insight into the central bank's monetary policy.

Salesforce, a Dow component, exceeded Wall Street expectations for its second-quarter results, leading to a 1.1 per cent increase in its shares.

Conversely, CrowdStrike dropped 6.7 per cent after reducing its revenue and profit forecasts following a global tech outage last month.

On the NYSE, advancing issues outnumbered decliners by a 1.52-to-1 ratio, and on the Nasdaq, by a 1.46-to-1 ratio.

The S&P index recorded 20 new 52-week highs and 4 new lows, while the Nasdaq saw 27 new highs and 41 new lows.

(With Reuters Inputs)