NEW YORK (AP) — A recovery for Nvidia is helping keep U.S. indexes close to their records Tuesday.
The S&P 500 rose 0.3% in afternoon trading, closing in on its all-time high set a week earlier. The recovery for Nvidia sent the Nasdaq composite up 1.1%, heading for its first gain in four days. The Dow Jones Industrial Average, which does not include Nvidia, lagged, falling 278 points, or 0.7%, as of 2:23 p.m. Eastern time.
Nvidia rose 5.4%, on pace to snap a three-day losing streak in which it had lost nearly 13%, its worst since 2022. It’s just one stock, but Nvidia has the power to top the S&P 500 swing as it has grown to become one of Wall Street’s largest and most influential stocks.
Voracious demand for Nvidia chips to power artificial intelligence applications has been a major reason the U.S. stock market has hit records lately, even as the economy’s growth slows 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 troubles for Nvidia haven’t raised many concerns, at least not yet, as market watchers hoped to see more stocks join the rising stock market instead of just a handful of AI winners.
That’s what happened Monday, as banks, oil companies and other stocks outside the AI boom rallied while Nvidia sank again. But given the slowdown in U.S. economic growth, it could be challenging for such stocks to continue picking up the slack from AI darlings.
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 7.6% 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&P 500, but Pool wasn’t alone. About 78% of the stocks in the index fell.
SolarEdge Technologies fell 22.6% 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%.
Overall, sales at retailers across the country have been up and down lately as companies highlight how lower-income customers are struggling to keep up with still-rising prices. However, the labor market still looks largely solid. A report on Tuesday also showed that confidence among US consumers fell this month, but not as much as economists expected.
Higher income households appear to be doing better and are booking trips on cruise ships. Carnival rose 8.4% after raising its 2024 profit forecast. The cruise line said bookings for the rest of the year are the best ever, both in terms of price and occupancy. And bookings for next year might be even better.
On the bond market, government bond yields remained relatively stable. The yield on the 10-year government bond rose to 4.24% from 4.23% at the end of Monday.
The price has largely fallen since its peak of 4.70% in late April, easing pressure on the stock market. Yields have fallen on hopes that inflation will slow enough to convince the Federal Reserve to cut 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 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. Historically, the S&P 500 has fallen an average of 20% in the 250 days after the first rate cut, according to the Wells Fargo Investment Institute.
That’s because it matters why the Fed cuts rates. If this happens simply because inflation has gotten low enough to drive interest rates down, it could be good for stocks. But if cuts are made because the economy suddenly veers 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.