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Market Performance Overview
Stocks had a strong day today, with major indexes rising sharply. The Nasdaq rose 1.5% and the Dow Jones Industrial Average rose 0.6%. The S&P 500 also rose, rising 1.1% to hit a new high.
Leading industries and stocks
Today’s market gains were driven by significant strength in the large-cap and semiconductor sectors. The PHLX Semiconductor Index (SOX) rose 2.1% and the Vanguard Mega Cap Growth ETF (MGK) gained 1.8%. Leading individual stock performers were NVIDIA (NVDA, Financials), Microsoft (MSFT, Financials) and Meta Platforms (META, Financials), which rose 7.2%, 2.7% and 3.3% respectively following gains in the previous session.
Economic Indicators and Market Reaction
The February Consumer Price Index (CPI) report showed that core CPI increased by 0.4% quarterly and 3.8% annually, slightly exceeding expectations. However, the market reaction was muted, with the focus being on expected declines in the housing index over the coming months. The probability of a rate cut at the June FOMC meeting remains high, with the CME FedWatch tool showing a 69.8% chance of a rate cut.
Treasury bond yields and industry performance
Affected by the CPI report, U.S. Treasury bond yields rose, with the 2-year Treasury bond yield rising 7 basis points to 4.60% and the 10-year Treasury bond yield rising 5 basis points to 4.16%. Rate-sensitive sectors in the S&P 500, utilities and real estate, underperformed, falling 1.0% and 0.4%, respectively. Conversely, the information technology sector outperformed, rising 2.5%, buoyed by a sharp earnings-related gain in large-cap stocks and Oracle (ORCL, Financials), the best performer in the S&P 500 today.
Economic Data Insights
Current economic data shows that the NFIB Small Business Optimism Index was 89.4 in February, slightly lower than the previous reading of 89.9. Both CPI and core CPI were in line with or slightly higher than consensus market expectations. The February Treasury budget showed an increase in the deficit from the previous year, with rising interest rates leading to an increase in net interest payments. Looking ahead, market participants expect the weekly MBA Mortgage Index and weekly crude oil inventory data.
Global markets and commodities
Internationally, the performance of the European market was mixed, with the German DAX index falling slightly and the FTSE and CAC index rising. Asian markets were also different, with the Nikkei down slightly, the Hang Seng up sharply and the Shanghai Composite down slightly. In terms of commodities, crude oil, natural gas, and silver prices fell, gold fell sharply, and copper remained unchanged.
Today’s news
Wall Street ended on a high note on Tuesday, with major indexes recording gains after the latest consumer inflation data did not significantly change expectations for a rate cut. The technology sector, particularly companies related to artificial intelligence, has experienced a significant boost, with Oracle (ORCL, Financials) and Nvidia (NVDA, Financials) leading the way. The Nasdaq rose 1.54% to close at 16,265.64 points; the S&P 500 rose 1.12%, hitting a new closing high of 5,175.26 points. The Dow Jones Industrial Average also rose 0.61% to close at 39,005.46 points.
Microsoft (MSFT, Financials) announced a quarterly dividend of $0.75 per share, maintaining its previous dividend rate and a forward yield of 0.72%. The dividend will be paid on June 13 to shareholders of record as of May 16, with the ex-dividend date set for May 15. The announcement comes against the backdrop of Microsoft’s strong financial position and bright outlook, while Microsoft participates in the Morgan Stanley Technology, Media and Telecommunications Conference.
Artificial intelligence remains a focus for investors, highlighted by Morgan Stanley’s identification of high-conviction stocks poised to benefit from U.S. productivity opportunities through artificial intelligence. The company is in an experimental phase of artificial intelligence adoption, focusing on customer support benefits and integrating GitHub into its research and development processes. This trend is expected to lead to significant margin growth in the second half of 2024 and 2025.
Super Micro Computer (SMCI, Financials) shares rose more than 7% after being highlighted as a new bull idea by Hedgeye analyst Felix Wang due to its key role in the artificial intelligence revolution. This surge is driven by a partnership with Nvidia (NVDA, Finance) to build AI GPU-based servers, underscoring the growing demand for AI servers.
On the regulatory front, partial driving automation systems from major automakers such as Tesla (TSLA, Financials), Ford (F, Financials) and General Motors (GM, Financials) received lukewarm ratings in a recent study, Research points to a lack of adequate measures to prevent misuse and maintain driver concentration.
Amid these developments, several companies have made strategic moves, including Allbirds (BIRD, Finance) naming Joe Vernachio as its new CEO and United Airlines Holdings (UAL, Finance) asking Boeing (BA, Finance) to halt production of the 737 Max 10 jets tend to be smaller models.
Finally, the energy industry is preparing for an increase in the energy consumption of artificial intelligence data centers, which is expected to increase from 1% to 4% of total electricity consumption by 2035. This forecast highlights the need for more and upgraded data center facilities to accommodate the growing energy demands of advanced chips.
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