Wall Street ended sharply higher on Thursday after a blowout forecast from Nvidia sent the chipmaker’s stock soaring and fueled a rally in AI-related companies. But the narrowly focused rally had limited influence on the Canadian market, which ended lower for the third straight session amid more disappointing big bank earnings and a drop in energy and materials sectors. Bond yields continued to rise, with Canada’s two-year bond flirting with the highest yields in more than 15 years.
Nvidia Corp soared 24% to a record high close after the world’s most valuable chipmaker forecast quarterly revenue 50% higher than estimates and said it was ramping up supply to meet demand for its artificial-intelligence (AI) chips.
Investors exchanged almost US$60 billion worth of Nvidia’s shares, accounting for a fifth of all trading in S&P 500 stocks during the session, according to Refintiv data.
“Nvidia has officially replaced FANG as the centerpiece of this market,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “Investors are obsessed with AI, and Nvidia is the perfect AI story.”
Heavyweight AI players Microsoft Corp and Alphabet Inc rose 3.9% and 2.1%, respectively. Advanced Micro Devices Inc jumped about 11%, Micron Technology Inc added 4.6% and Broadcom Inc climbed more than 7%.
The Philadelphia SE Semiconductor index soared 6.8% to its highest level in more than a year in its biggest daily percentage rise since November.
Intel Corp, which investors view as lagging in the AI race, dropped 5.5%, weighing on the Dow Jones Industrial Average.
Wall Street has been jittery in recent days about dragging negotiations in Washington to raise the nation’s US$31.4 trillion debt ceiling and avoid a default.
U.S. President Joe Biden and Republican lawmaker Kevin McCarthy on Thursday were edging close to a deal, with the parties just US$70 billion apart on discretionary spending, Reuters reported, citing a source familiar with the talks.
Reflecting market uncertainty, two-year U.S. yields hit their highest since March after ratings agencies Fitch and DBRS Morningstar put the United States on a credit watch for a possible downgrade. The Canadian two-year bond yield was up 9 basis points by late afternoon to 4.279%, approaching the more than 15-year high of 4.37% reached in early March.
Meanwhile, data showed the number of Americans filing new claims for unemployment benefits rose only moderately last week, while a Commerce Department report confirmed economic growth slowed in the first quarter.
The S&P 500 climbed 0.88% to end the session at 4,151.28 points. But declining stocks still outnumbered rising ones within the S&P 500 by a 1.4-to-one ratio.
The Nasdaq surged 1.71% to 12,698.09 points, while the Dow Jones Industrial Average declined 0.11% to 32,764.65 points.
The S&P 500 is now up about 8% so far in 2023 and the Nasdaq has recovered over 30% from its losses last year.
In U.S. stock moves, Ralph Lauren Corp rallied 5.3% after the luxury retailer beat profit estimates.
Electronics retailer Best Buy Co Inc rose 3.1% following upbeat quarterly earnings, while discount store chain Dollar Tree Inc tumbled after cutting its annual profit outlook.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 153.61 points, or 0.8%, at 19,774.08, its lowest closing level since March 28.
Royal Bank of Canada, the TSX company with the highest market capitalization, reported a decline in quarterly earnings. Its shares slid 1.8%, while Toronto Dominion bank shares were down 4.2% after the lender said it would not be able to meet its earnings growth target.
In contrast, Canadian Imperial Bank of Commerce shares ended up 2.1% after the company beat expectations for earnings per share.
“The broader themes that have emerged (for banks) are higher provisions for credit losses,” said Angelo Kourkafas, investment strategist at Edward Jones Investments.
“No doubt there are some profit pressures with higher expenses and slowing loan growth but at the same time fundamentals remain fairly solid.”
The energy sector shed 2.2% as Russia played down the prospect of further OPEC+ production cuts at its meeting next week, pressuring oil.
U.S. crude prices settled 3.4% lower at US$71.83 a barrel, while a drop in the price of gold contributed to 1.7% decline for the materials sector.
The TSX tech sector added 0.4%.
Reuters, Globe staff