The beginning of the new month of equity trading has ignited optimism among investors, particularly fueled by the impressive performance of Nvidia shares. Over the weekend, Nvidia announced plans for its next-generation Rubin platform, scheduled for release in 2026. This news has spurred positive sentiment in the market. However, there is a backdrop of caution as benchmark Treasury yields are hovering near their highest levels since early November. Investors remain wary due to concerns about persistent inflationary pressures and the potential for sustained high Fed funds rates, factors that could temper the stock market’s bullishness.
James Reilly, a market economist at Capital Economics, points out the ongoing interplay between various forces influencing U.S. stocks. Last week, for instance, Treasury yields retreated following uneventful PCE inflation data. This development provided a boost to nine out of the eleven main S&P 500 sectors. However, the information technology sector faced challenges following underwhelming earnings reports from companies like Salesforce and Dell, which hindered the broader market’s upward momentum. Despite these fluctuations, Reilly emphasizes the dominant influence of “AI hype” in driving the S&P 500 to record highs recently.
Reilly underscores the enduring impact of artificial intelligence (AI) on the stock market, as evidenced by the sustained bull run in sectors such as Nvidia. He anticipates this trend to continue, driven by the expanding applications of AI technology across various industries. Moreover, Reilly predicts a broadening of the market rally as the full potential of AI technology becomes increasingly apparent.
Crucially, Reilly foresees Treasury yields providing a supportive backdrop for the stock market in the long term. Softening economic data in recent weeks prompted Capital Economics to revise down its second-quarter U.S. GDP growth forecast, signaling the potential for a reduction in interest rates by the Federal Reserve. Reilly anticipates a decline in the 10-year Treasury yield from its current level of around 4.5% to 4.0% by the end of 2024, further bolstering the bullish outlook for the S&P 500.
Against this backdrop, U.S. stock-index futures are exhibiting mostly positive movements, particularly in the tech sector, while benchmark Treasury yields experience a slight dip. Concurrently, the dollar index registers gains, while oil prices retreat and gold maintains a stable position around $2,327 an ounce.
In other market news, notable developments include the surge in GameStop stock following influential trader Keith Gill’s apparent revelation of a significant stake in the company, Paramount Global’s stock rise amid reports of a buyout option for nonvoting shareholders by Skydance Media, and the decline in GSK shares following a Delaware State Court ruling allowing jury trials in cases related to the heartburn drug Zantac.
Amidst these developments, U.S. economic data releases and corporate earnings announcements remain focal points for market participants, shaping investment decisions and market sentiment in the weeks ahead.
