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Nasdaq surges, Nvidia rises as job market further cools

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U.S. stocks rose on Wednesday on growing optimism about interest rate cuts amid signs of slowing labor demand and a cooling economy.

The S&P 500 (^GSPC) rose about 0.8%, with the tech-heavy Nasdaq Composite Index (^IXIC) leading the gains with a gain of about 1.4%, while the Dow Jones Industrial Average (^DJI) added about 0.2%.

Technology stocks were the clear leaders on Wednesday, with big names Nvidia (NVDA) and Meta (META) up more than 2% and Alphabet (GOOGL, GOOG) up about 1%.

Stocks have been volatile as markets waver on whether to interpret softening economic data as a positive sign that the Federal Reserve may be about to cut interest rates, or a negative sign that points to the start of a broader economic slowdown.

Data released on Tuesday showed job openings fell to a three-year low in April. Cracks in the labor market could prompt the Fed to cut borrowing costs, but it’s also a sign the economy is headed toward a recession rather than a soft landing.

read more: How does the labor market affect inflation?

Still, expectations for a change in Fed policy appear to be rising: About 65% of traders now expect policymakers to cut rates at their September meeting, according to CME FedWatch, up from less than 50% a week ago.

The ADP Private Payrolls report released on Wednesday showed private sector growth in May fell short of expectations, providing the latest evidence of a cooling labor market. But more attention is now turning to the week’s labor data highlight, the key monthly jobs report due for release on Friday.

Among individual stocks, Hewlett Packard Enterprise shares rose as much as 15%, its biggest gain since 2016. The surge came after HPE reported better-than-expected earnings thanks to a surge in AI-focused server sales.

live8 Updates

  • As the US labor market cools, wage growth for job-changers slows

    The wage gap between those who stay in their jobs and those who switch jobs narrowed in May, in the latest sign that the U.S. labor market is cooling after a strong start to 2024.

    New ADP data released Wednesday showed that median year-over-year wage growth for job changers slowed to 7.8% in May, down from recent sharp increases of 8.3% in March and 8% in April. The gap in wage growth between job changers and job changers grew at a 5% pace in May, the lowest since February and far from where it will be in 2022-2023.

    “We’ve seen over the last two years that people’s willingness to change jobs has really declined,” ADP Chief Economist Nella Richardson said on a conference call with reporters Wednesday morning.

    Mr. Richardson notes that the trend of fewer people quitting their jobs for bigger pay is not new; he and other economists have tracked a shift from the “Great Leave” to the “Great Stay.” But another change has been happening recently: Companies are focusing more on retaining and training workers than on recruiting, making it harder for job seekers to get new jobs.

    “When you talk to employers, their mindset has changed dramatically over the past year,” Richardson said. “Instead of being completely focused on recruiting and replacing employees, they’re really focused on productivity, getting the most out of their workforce, and increasing employee engagement.”

    Richardson added that workers are still looking for work, it’s just “it seems to be taking a little longer.”

    Please see here for the detail.

  • Beyond Nvidia in AI…

    Shares of NVIDIA (NVDA) hit a new intraday high shortly after the start of trading as investors buoyed the stock on hopes of strong demand for AI chips.

    But that doesn’t mean investors should flock to follow AI trading.

    In fact, industry insiders are calling for a face-to-face look at reality.

    I had the opportunity to speak with Nutanix (NTNX) CEO Rajiv Ramaswami at the BofA Global Tech Conference, where he expressed excitement about the growth prospects of AI but cautioned that “investments in AI are ahead of reality.”

    “You need a valid business case to justify the cost of an AI investment, and right now there’s a bit of a disconnect between the two,” Ramaswamy told me.

    This is likely to drive down the value of many start-ups, Ramaswamy said, adding that “it may slow down investment in these big builds.”

    Ramaswamy is not alone in warning that current projections are unrealistic.

    Pure Storage (PSTG) founder John “Coz” Colgrove said expectations are “overestimated” in the short term.

    “AI is going to be transformative, but it’s going to take a little longer than people think. What people think will happen in the next 10 years is probably going to take 25 years. It’s going to happen, but it’s going to take a little longer to build the infrastructure and actually have it effective everywhere,” Colgrove said.

    Yes, talk of the AI ​​bubble has come up again.

  • NVIDIA shares hit all-time high ahead of stock split

    Nvidia (NVDA) stock continues to rise.

    The chipmaker’s shares rose about 3% on Wednesday morning to a record high just shy of $1,200 per share, a move that came just days before the company plans to implement a 10-for-1 stock split.

    The stock has risen about 35% over the past month as Wall Street became more bullish on the company’s AI prospects following the company’s latest earnings report.

  • Services sector growth beats Wall Street expectations

    Economic activity in the services sector expanded in May after contracting in April for the first time in nearly two years.

    The Institute for Supply Management’s services PMI rose to 53.8 in May from 49.4 in April and above economists’ expectations of 51, according to Bloomberg data.

    A reading above 50 indicates that the sector is in expansion territory.

    Elsewhere in the release, the price payments index fell to 58.1 from 59.2 in the previous month, while new orders and employment measures increased. Notably, however, the employment index came in at 47.1, reflecting that the index remains in contraction territory.

    “The increase in the composite index in May came despite a marked uptick in business activity, accelerating growth in new orders, slowing supplier deliveries and a continuing contraction in employment,” Anthony Nieves, chairman of the ISM Services Business Survey Committee, said in a statement. “Survey respondents noted that while overall business is expanding, growth rates continue to vary across companies and industries.”

    “The majority of respondents point to inflation and current interest rates as impediments to economic improvement,” he added.

  • Stock market surges at opening

    U.S. stocks surged on Wednesday as optimism grew over interest rate cuts amid signs of slowing labor demand and a cooling economy.

    The S&P 500 (^GSPC) rose 0.4%, with the tech-heavy Nasdaq Composite Index (^IXIC) leading the gains with a 0.7% gain, while the Dow Jones Industrial Average (^DJI) added about 0.2%.

    The moves come amid rising expectations for a change in Fed policy: About 65% of traders now expect policymakers to cut interest rates at their September meeting, according to CME’s FedWatch tool, up from less than 50% a week ago.

  • Tech Stock Information

    The AI ​​chip craze is expected to bring big business to Lam Research (LRCX).

    The chip supplier, whose customers include Intel (INTC), Samsung, and Taiwan Semiconductor (TSMC), expects its high-bandwidth memory business to grow threefold this year, with “even stronger” demand in 2025.

    “Frankly, we see continued strength for the foreseeable future,” Doug Bettinger, chief financial officer at Lam Research, said late Tuesday at the Bank of America Global Technology Conference. “The opportunity facing the industry, and Lam in particular, is incredible,” Bettinger added.

    This week, analysts at Bank of America raised their price target on the stock to $1,100 while maintaining a buy rating.

    Analyst Vivek Arya (who also expressed a bullish view on Nvidia on Yahoo Finance Live yesterday) noted that while the chip-making equipment maker’s stock is currently trading at a premium relative to historical levels, he and his team believe the valuation is justified, in part because AI has driven wafer fab equipment (WFE) intensity to record levels.

    The company’s recently approved 10-for-1 stock split and a new $10 billion share repurchase plan reignited investor excitement last month.

    But Lam continues to underperform compared with its rivals: Its shares are up 18% this year, compared with Applied Materials’ (AMAT) 31% gain and ASML Holdings (ASML) 26% gain.

  • Apple’s WWDC is coming

    Continuing a five-day rally, Apple (AAPL) shares are looking to surpass their late January closing high of $195.75 ahead of WWDC this Monday.

    Morgan Stanley analyst Eric Woodring provides an in-depth analysis of the events leading up to and after WWDC and what to expect for Apple’s stock price.

    Sa Woodring:

    “At WWDC, we believe Siri 2.0 will be announced as a next-generation voice-activated virtual assistant/intelligence layer capable of handling more complex commands directly on the iPhone. This will increase the practical value of the device and its native applications, including text/website summaries, automated messaging, and new photo editing tools. Additionally, we believe there is a high probability that Apple will announce a cloud-based foundational model partnership (GOOGL or OpenAI?) at WWDC, which will add a wide range of cloud-based AI chatbot-like features to iOS18. We expect Siri’s capabilities to continue to evolve over time, including more complex multi-commands and deeper integration with third-party applications in future software updates, but this will represent Apple’s most significant software overhaul to date, officially entering Apple into the mega-cap generation AI race.”

    Historically, WWDC news is well received by investors after the event. Historically, WWDC news is well received by investors after the event.

    Historically, WWDC news is well received by investors after the event. (Morgan Stanley)

  • GameStop, Day 3

    I am still keeping an eye on GameStop (GME) stock.

    The stock is down about 1% in premarket trading, following a 5.36% drop on Tuesday. The stock is down 36% from the high it hit on Monday after the Roaring Kitty post.

    Yesterday afternoon I did a special recording of the “Opening Bid” podcast, 100% focused on GameStop. Check it out below. I came away wondering if I was thinking about this stock all wrong.



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