Market Insights

Stocks keep rising as artificial intelligence revives interest in technology and growth stocks. Last week’s big mover was AI leader Nvidia.

The semiconductor giant jumped 25 percent after forecasting revenue far above consensus estimates. It closed at a record high and approached the elite club of $1 trillion in market capitalization.

“A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process,” NVDA founder and CEO Jensen Huang said. “We are significantly increasing our supply to meet surging demand.”

NVDA’s breakout helped drive rallies in other technology stocks. Fellow chipmakers Advanced Micro Devices (AMD), Broadcom (AVGO) and Marvell Technologies (MRVL) climbed more than 19 percent. Arista Networks (ANET) and Adobe (ADBE), which have potential exposure to AI, also jumped.

Those helped lift the Nasdaq-100 by 3.5 percent between Friday, May 19, and Friday, May 26. It was the second straight weekly gain of more than 3 percent. The broader S&P 500 also climbed 0.3 percent. The broader Dow Jones Industrial Average fell 1 percent because of weakness in consumer staples and health-care stocks.

Fed Pause?

Last week also brought potentially good news from the Federal Reserve. Minutes from the May 2-3 meeting noted that “several” policymakers thought further interest-rates hikes may not necessary. In contrast, only “some” favored more tightening. Other comments about “uncertainty” and “the need to retain optionality” suggested the central bank may finally stop raising rates at the next meeting on June 14.

Other data suggested that the economy remains on solid footing. Initial jobless claims fell more than expected and durable-goods orders surprised to the upside. The Commerce Department revised first quarter gross domestic product higher by 0.2 percentage point, while the University of Michigan bumped up its reading of consumer sentiment.

S&P Global also noted that manufacturers’ input prices dropped for the first time in three years as inventories increased. Service providers were also optimistic about demand and hiring. That may suggest business has returned to the normal conditions that existed before the coronavirus pandemic.

Charting the Market

The S&P 500 ended last week at its highest closing price since August. The index briefly dipped below the previous week’s low before rebounding — a potentially bullish false breakdown.

It also remained above 4100, about 50 points above the troughs of May 4 and April 26. Those incrementally higher lows may suggest buyers outnumber sellers.

TradeStation data showed more S&P 500 companies ended Friday above their 20-day moving averages than above their 50-day moving averages. It was the first time that had happened for over a month. Similar crossovers in June, January and March were followed by rallies in the broader market.

Debt Ceiling

Attention this week will likely focus on raising the debt ceiling. There are also some important economic events and earnings reports.

Republican and Democrat negotiators reached an agreement on the national debt during the holiday weekend. Representatives may vote on the bill as early as tomorrow. It must clear the Senate and be signed by President Biden by June 5, when Treasury Secretary Yellen estimates the government will run out of money. Delays to its passage may trigger volatility in financial markets.

Computer maker HP (HPQ) announces quarterly results this afternoon.

Salesforce.com (CRM) follows after the closing bell on Wednesday.

Thursday morning is busy with several economic reports: ADP’s private-sector payrolls, initial jobless claims, the Institute for Supply Management’s manufacturing report and crude-oil inventories. Earnings are due from Macy’s (M), AVGO, Dell Technologies (DELL) and Zscaler (ZS).

Friday brings the employment report for May, which includes non-farm payrolls, unemployment and wages. Those will probably shape expectations about the Fed meeting. Monthly auto sales will also be released.

Standardized Performances for ETF mentioned above