Nvidia Leads Chip Stocks Rally, All Eyes on Fed
Nvidia Leads Chip Stocks Rally, All Eyes on Fed
By:JJ Kinahan
Meanwhile, markets are rebounding as economic data eases recession fears ahead of the FOMC meeting
Chip stocks are rebounding as Nvidia shares an optimistic AI outlook.
Economic data is easing the fear of recession fears ahead of next week’s FOMC meeting.
Markets are showing resilience as they rebound after early losses throughout the week.
Stocks started on shaky ground yesterday but gained momentum as the day progressed. The S&P 500 climbed 0.75%, with all 11 sectors closing higher, while the Nasdaq Composite rose 1%.
Small-cap stocks led the way, with the Russell 2000 adding 1.3%. These gains followed two days of better-than-expected economic data.
On Wednesday, the positive consumer price index (CPI) report set the tone, followed by yesterday’s producer price index (PPI) report. The PPI showed core prices slightly higher than forecast month-over-month, easing the fear of recession.
Economic reports seem promising
This week’s stronger economic data has alleviated some of the concern about recession, which is reflected in the commodities market, where oil is poised to break a four-week losing streak. In premarket trading, oil prices are up 1%.
The key question now is whether the Federal Reserve Open Market Committee (FOMC) will implement a quarter-point or half-point rate cut next week. The CME Fed Watch Tool puts the odds of a quarter-point cut at 58%, and a half-point reduction at 42%.
A quarter-point rate cut seems likely, as a larger cut might signal heightened concerns about the economy and could unsettle markets.
A return to optimism about chip-makers
Chip stocks, particularly Nvidia (NVDA), have been one of the week’s standout performers. On Wednesday, Nvidia’s CEO Jensen Huang shared optimistic projections for the company’s future in AI chipmaking.
As a result, Nvidia's stock rose nearly 2% on yesterday and 16% for the week. The positive momentum also lifted other chipmakers, with Taiwan Semiconductor Manufacturing (TSM) up almost 10% and Advanced Micro Devices gaining 12% for the week.
For now, sticking to long-term investment plans seems prudent, especially with the market showing signs of resilience after recent reversals.
JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
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