Market Overview:
On Wednesday, U.S. stock markets rebounded strongly from early losses, driven by a significant rally in technology stocks and a positive response to the latest inflation data. The Nasdaq Composite (^IXIC) led the charge with a nearly 2.2% gain, while the S&P 500 (^GSPC) rose more than 1%. The Dow Jones Industrial Average (^DJI) also climbed about 0.2%, or over 100 points.
Key Drivers:
Nvidia’s Rally:
Nvidia (NVDA) was a standout performer, with its shares surging over 8%. The boost came as CEO Jensen Huang spoke at a Goldman Sachs conference, highlighting the company’s strong position in the AI sector.
Inflation Data:
August’s consumer price index (CPI) showed a slight decline in headline inflation, reaching its lowest point in over three years. However, the “core” CPI, which excludes food and energy prices, increased by 0.3% month-over-month, exceeding the 0.2% forecast by economists.
The inflation data has influenced expectations for the Federal Reserve’s upcoming policy meeting. With core inflation coming in hotter than anticipated, the market now leans towards a smaller 25 basis-point rate cut rather than a more aggressive 50 basis-point reduction. The probability of a 50 basis-point cut has dropped to 15%, from 44% a week ago, according to the CME FedWatch Tool.
Presidential Debate Impact:
Investors were also digesting the results of the recent presidential debate between Donald Trump and Kamala Harris. The debate provided limited details on key issues such as tariffs, taxes, and regulation, leaving investors uncertain about potential economic policies and their market impact.
GameStop Decline:
GameStop (GME) saw a significant drop of nearly 12% after reporting a revenue miss for the quarter and announcing plans to issue 20 million new shares. This move raised concerns about the company’s financial health and future performance.
Outlook:
The strong performance of tech stocks, particularly Nvidia, provided a significant boost to the broader market. The inflation data and the evolving Fed policy expectations will continue to be key factors influencing market movements in the coming weeks. Additionally, the outcome of the presidential election debates and the ongoing economic indicators will play a crucial role in shaping investor sentiment and market trends.
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