Wall Street's main indexes closed more than 1% higher on Wednesday, bouncing back from a three-day selloff with a boost in sentiment from technology and chip stocks, which rose ahead of Nvidia's quarterly results.
Investors will look to the latest report from Nvidia NVDA.O, the leading artificial intelligence chipmaker and the world's most highly valued company, for reassurance that the appetite for spending on AI remains strong enough to support lofty valuations across the technology sector.
The Philadelphia SE Semiconductor index .SOX rallied sharply ahead of the report with big gainers including Astera Labs ALAB.O and ARM Holdings ARM.O.
"Technology is driving the bus again today, and the AI theme. We've swapped back from yesterday's concerns about rising rates and potential inflation and are leaning more into the all-things-AI story," said Carol Schleif, chief market strategist at BMO Private Wealth in Minneapolis. "It's actually a little bit unusual because you would expect the market to sit pretty quiet waiting for Nvidia's results later today. But there's clearly a lot of optimism."
The lack of a resolution to the U.S.-Israeli war on Iran had sent U.S. indexes lower in the last three days as investors worried that elevated oil prices would boost inflation enough to lead the Federal Reserve to raise interest rates.
On Wednesday, Iran's foreign ministry spokesperson said the exchange of messages between Iran and the U.S. has continued. President Donald Trump said negotiations with Iran were in the final stages and that the U.S. may have to attack Iran even harder but would wait and see if they can reach a deal.
While investors are still monitoring fluctuating energy prices and inflation, Schleif said "they really want to look beyond what's going on in the Middle East" and focus on the potential of AI.
Also supporting stocks, the benchmark 10-year Treasury yield eased on Wednesday after rising for three straight days and touching a 16-month high. US/
According to preliminary data, the S&P 500 .SPX gained 79.06 points, or 1.08%, to end at 7,432.67 points, while the Nasdaq Composite .IXIC gained 398.33 points, or 1.54%, to 26,269.04. The Dow Jones Industrial Average .DJI rose 647.44 points, or 1.31%, to 50,011.32.
Stocks gradually added to gains following the release of minutes from the Federal Reserve's last meeting, which showed more officials saying the central bank should lay the groundwork for a possible rate hike. Bets for a Fed rate hike in December were choppy after the meeting and recently showing a 36.8% probability, down from 42% on Tuesday, according to the latest data from CME Group's FedWatch tool.
Citing uncertainty around issues such as oil prices, tariffs and AI, Brian Jacobsen, chief economic strategist at Annex Wealth Management, said after the minutes that "it’s hard to take any of their forward guidance as more than just mere guesswork."
Among the 11 major S&P 500 sectors, big gainers included consumer discretionary .SPLRCD and technology .SPLRCT. On the flip side, energy .SPNY dropped with oil prices.
Consumer staples .SPLRCS slipped with pressure from Target TGT.N. Shares in the retailer declined after it warned of a challenging macroeconomic backdrop even as it doubled its annual sales growth forecast.
Falling oil prices boosted sentiment around airline stocks with Delta Air Lines DAL.N, United Airlines UAL.O, Southwest Airlines LUV.N and Alaska Air ALK.N advancing.
Intuit INTU.O shares declined after Reuters, citing an internal memo, reported that the company is laying off about 3,000 employees.
Reuters
