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Stocks surged in the US on Thursday, as earnings from NVIDIA Corp. and solid economic data eased concerns about an impending economic slowdown. The S&P 500 Index added 1.6%, while the tech-heavy NASDAQ 100 jumped 1.8% after NVIDIA's quarterly results topped expectations. NVIDIA rose 3.2% to extend a recent rally driven by technology shares, as the company's outlook continued to reassure markets uneasy over a bubble in the AI industry.
NVIDIA's earnings results blew past analysts' estimates, silencing worries that AI stocks have become overvalued. The company's strong revenue forecast pushed the tech-heavy NASDAQ 100 higher, which acted to pull the broader market up.
NVIDIA's resilience has been crucial for maintaining the AI investment cycle, and many investors view the company as a proxy for the health of the AI industry as a whole. Chief Executive Officer Jensen Huang also rejected the notion of an AI bubble, saying that demand for AI-based technology remains very strong.
Beyond NVIDIA, other heavyweight technology stocks like Alphabet and Meta Platforms extended the rally higher. A wider index of the seven biggest technology stocks, including NVIDIA, Alphabet, and Meta, climbed 2.8%, to indicate sustained investor optimism in the sector.
This year, the rally in tech stocks has been a main driver of growth, especially in the AI space. According to analysts, strong earnings from NVIDIA and an upbeat outlook have been instrumental in keeping the tech sector aloft amid broader macroeconomic uncertainties. The strong performance in tech has cemented confidence that the AI boom will continue providing further tailwinds for the stock market into the end of the year.
Besides robust corporate earnings, mixed signals also came from the issuance of the September jobs report. Though the data reflected a rebound in job growth, the unemployment rate rose to 4.4%, a level not seen in nearly four years. That suggested that while the resilient labor market is still holding its own, signs of cooling are emerging.
Labor market conditions have been one of the major influences on the Federal Reserve's policy stance, and the jobs report complicated the debate over future interest rate cuts. Bond markets reacted to the data by pricing in a slightly higher likelihood of a rate cut in December, with money markets now pricing in a nearly 35% chance, up from about 20% before the report.
Despite this uncertainty, stocks continued to rally because investors interpreted the jobs data as an indication of an economy that is not overheating. The cautious path of rate cuts by the Fed was coupled with strength in the key sectors of tech, thereby offering a favorable backdrop for equities.
Corporate earnings continue to prove resilient, with a slew of large companies reporting positive results.
Walmart Inc., for example, increased its full-year sales and profit outlook, indicating that the world’s largest retailer is keeping rising costs under control and luring in price-sensitive shoppers. Walmart’s news helped push its stock up 2.8% and added to the rally in retail and consumer stocks.
On the other hand, Bath & Body Works Inc. suffered a loss as its stock tumbled 24% after cutting its full-year earnings forecast. This reflects the struggles for the retail sector, with the shift in consumer sentiment, especially with inflation continuing to pinch household spending.
Other noteworthy corporate actions: Verizon Communications Inc. announced it will lay off as many as 20% of its non-union employees as part of a larger restructuring.
Shares of Cipher Mining Inc. jumped 13% after the company landed another AI hosting contract and additional funding from Alphabet Inc.'s Google.
While some individual companies have reported setbacks, the broader corporate landscape continues to reflect steady growth, as several companies have raised their outlook for the year ahead. Investors center on better-than-expected earnings that also show a clearer path to growth in subsequent quarters.
The rally in the stock market on Thursday was driven by strong corporate earnings, mainly from NVIDIA, which allayed fears of an AI bubble. Although the September jobs report posted some signs of labor market cooling, it did not dampen the prospects of a further rise in the stock market. With a potential Fed rate cut on the horizon and a continued focus on innovation in tech, especially AI, the market outlook for the remainder of the year remains cautiously optimistic.
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