Stan Choe
The US stock market is rising, led by its most influential stock, Nvidia.
The S&P 500 rose 0.9 per cent and pulled within 1.1 per cent of its all-time high set late last month. The Dow Jones was up 308 points, or 0.6 per cent, and the Nasdaq composite was 1.3 per cent higher.
The Australian sharemarket is set to advance, with futures at 4.56am AEDT pointing to a rise of 59 points, or 0.7 per cent, at the open. The ASX added 0.5 per cent on Wednesday. Reporting season continues with the likes of Telstra, Wesfarmers and Medibank due up. The Australian dollar was trading at US70.62¢ at 5.10am AEDT.
On Wall Street, Nvidia climbed 2.3 per cent after Meta Platforms announced a long-term partnership where it will use millions of chips and other equipment from Nvidia for its artificial-intelligence data centres.
“No one deploys AI at Meta’s scale,” Nvidia CEO Jensen Huang said. Because his company is the most valuable on Wall Street, Nvidia’s stock was the single most powerful force pulling the S&P 500 higher.
That performance demonstrated the upside of AI development for the US stock market. But investors have also focused on the potential downsides recently, which has led to sharp swings for Wall Street. Worries are rising, for example, about how much companies like Meta are spending on AI and whether they can possibly make back their huge investments through higher profits and productivity in the future.
Meta’s stock fell as much as 1.7 per cent before bouncing back to a gain of 0.3 per cent.
Another big worry is that if AI succeeds in creating tools to do complicated tasks more cheaply, companies in industries as far flung as software and legal services and trucking logistics may see their businesses get undercut. That has pushed investors to suddenly and aggressively punish stocks of companies seen as under threat, and analysts have likened it to a “shoot first-ask questions later” mentality.
Several profit reports from companies helped to lift stocks on Wednesday. They continued what’s been a strong reporting season for the big US companies in the S&P 500.
Cadence Design Systems climbed 9.1 per cent after delivering both profit and revenue for the latest quarter that topped analysts’ expectations. CEO Anirudh Devgan credited what he called “the essential nature of Cadence’s engineering software,” even as investors worry about AI threatening to remake the industry.
Analog Devices rose 2.7 per cent after likewise topping analysts’ estimates for profit and revenue. The chip company said it saw record orders during the quarter for its data centre business.
Outside of earnings reports, Moderna rose 5.5 per cent after saying regulators at the Food and Drug Administration will review its flu vaccine candidate after earlier refusing to consider it.
They helped offset a 5.5 per cent drop for Palo Alto Networks. The cybersecurity company reported a stronger profit for the latest quarter than analysts expected, but it gave profit forecasts for the current quarter and the remainder of its fiscal year that fell short of their estimates.
In the bond market, Treasury yields ticked higher ahead of the afternoon’s release of minutes from the latest meeting of the Federal Reserve. The yield on the 10-year Treasury rose to 4.07 per cent from 4.05 per cent late Tuesday.
The Fed has put a pause on its cuts to interest rates, but many on Wall Street expect it to resume later this year. Details within the last meeting’s minutes could alter bets for when that could be. The widespread expectation is that it will come during the summer, after a new chair is scheduled to step in atop the Fed.
Lower rates can give a boost to the economy and prices for investments, but that comes at the cost of potentially worsening inflation.
Some better-than-expected reports on the US economy also helped to lift Treasury yields. One said that industrial production improved last month by more than economists expected. Another said orders for computers, fabricated metal products and other long-lasting manufactured goods rose more in December than economists expected, when not including airplanes and other transportation equipment. A third report said homebuilders broke ground on more new homes in December than expected.
Such strong data could encourage the Federal Reserve to keep its pause on cuts to rates for longer.
In stock markets abroad, London’s FTSE 100 climbed 1.3 per cent after the latest update on UK inflation bolstered expectations that the Bank of England may soon cut interest rates.
Japan’s Nikkei 225 rose 1 per cent as Prime Minister Sanae Takaichi was reappointed by the parliament following a landslide victory for her ruling Liberal Democrats in a February 8 election. The expectation is that she will push through policies to help the economy and markets.
Elsewhere in Asia, several markets were closed for the Lunar New Year holiday.
AP
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