In a positive turn of events for the U.S. economy, weekly jobless claims fell unexpectedly, signaling a resilient labor market. Additionally, corporate profits showed a robust recovery in the second quarter, reinforcing investor confidence. As a result, the S&P 500 climbed to a record high, marking a significant milestone in the ongoing market rally.
On August 28, the S&P 500 reached an all-time high following the release of Nvidia's quarterly report. Although the report fell short of lofty investor expectations, it confirmed that spending on artificial intelligence (AI) infrastructure remains strong. Nvidia's shares dipped almost 1% after the company announced that it would exclude potential sales in China from its forecast due to ongoing Sino-U.S. trade uncertainties.
Despite this minor setback, Nvidia's impressive 56% surge in quarterly revenue reassured investors about the robust demand for AI technology. This positive sentiment sparked a rally in AI-related stocks, significantly contributing to Wall Street's recent highs. Major players in the AI sector, including Microsoft and Meta Platforms, saw their shares increase by approximately 0.5%, while Amazon and Broadcom reported gains of 1.1% and 3%, respectively.
The S&P 500 closed up 0.25% at 6,497.88 points, achieving a record high for the second consecutive day. The Nasdaq rose 0.54% to 21,705.67 points, while the Dow Jones Industrial Average edged up 0.05% to 45,587.83 points. Notably, six of the eleven S&P 500 sector indexes saw gains, with communication services leading the way with a 1.04% increase, followed closely by a 0.6% rise in information technology.
In corporate news, Nike shares rose by 0.2% after the sports apparel brand announced a minor reduction of less than 1% in its corporate workforce, aiming to reclaim market share from competitors. This decision reflects the company's ongoing efforts to navigate the competitive landscape.
Investor optimism was further bolstered by the recent decline in weekly jobless claims and a separate report indicating a rebound in corporate profits for the second quarter. These positive economic indicators have led to speculation that the Federal Reserve may soon cut interest rates to support economic growth. Market traders are pricing in over an 80% chance of an interest rate cut in the upcoming month, according to the CME Group's FedWatch.
As the market anticipates key economic data, all eyes will be on Friday's Personal Consumption Expenditures report. Any signs of rising inflation could temper expectations for easing at the Fed's policy meeting in September. Furthermore, Fed Governor Lisa Cook has recently filed a lawsuit against President Donald Trump, challenging his attempt to remove her from office, adding another layer of complexity to the economic landscape.
In notable corporate earnings news, Snowflake, a data analytics company, saw its stock surge by 22% after raising its forecast for fiscal 2026 product revenue, largely driven by increasing demand for AI solutions. Similarly, HP Inc. experienced a 2% rise after exceeding quarterly revenue estimates, attributed to the growing demand for AI-powered personal computers.
Conversely, Hormel Foods, a packaging food company, faced a significant decline, with shares tumbling 13% after issuing a cautious quarterly profit forecast. Overall, declining stocks outnumbered those on the rise within the S&P 500 by a 1.7-to-one ratio, although the index recorded 27 new highs and four new lows, while the Nasdaq noted 105 new highs and 37 new lows.
As the market continues to navigate these developments, the interplay between corporate earnings, economic indicators, and Federal Reserve policies will remain crucial in shaping investor sentiment and market dynamics.
