Stocks end slightly higher after Fed comments, ahead of Nvidia

It was a total seesaw day but staying in tight range not too far from break-even and with all indexes closing with modest gains as everyone holds off on the big bets awaiting Wednesday’s Nvidia report. (Actually, it’ll be Thursday since the report will not be published on Wednesday until after market close.) The graph below shows how this enormously successful company that is leading the AI charge has become a major presence on the tech indexes. 

It is expected the company will get an 8.7% boost (or a $200B market cap) by Friday. Meanwhile, with Q1 winding down, the retail sector slipped a bit. Two big events will shape markets on Wednesday – Nvidia and Fed minutes, with today the odds being 64.8% for a September rate cut, up slightly from yesterday’s 63.3 but still considerably down from last week’s 70%. After some days of exuberant volume, today the numbers came in just a little below the 4-week average at 11.39 billion. 

Stocks end slightly higher after Fed comments, ahead of Nvidia

By Chuck Mikolajczak

Tue May 21, 2024 4:28 PM

DJ: 39,806.77  -196.82         NAS: 16,794.87  +108.91       S&P: 5,308.13  +4.86       5/20

DJ: 39,872.99  +66.22          NAS: 16,832.62  +37.75         S&P: 5,321.41  +13.28     5/21

NEW YORK, May 21 (Reuters) - U.S. stocks closed with slight gains on Tuesday, sending the S&P 500 and Nasdaq to record levels, as investors assessed the latest comments from Federal Reserve officials for clues on the timing of a rate cut while quarterly earnings from Nvidia drew closer.  Nvidia (NVDA.O), opens new tab, Wall Street's third-largest firm by market capitalization, will report results after the closing bell on Wednesday in what is likely to be a significant market catalyst and will test whether the outsized rally in AI-related stocks can be sustained. 

    Reuters Graphics 

Nvidia's options are primed for an 8.7% swing, or $200 billion in market cap, in either direction by Friday, according to data from options analytics firm Trade Alert. The chipmaker's shares were up 0.64% on Tuesday and are up about 93% on the year, after surging nearly 240% in 2023.  Investors also looked toward minutes from the Fed's most recent policy meeting, due on Wednesday, after multiple Fed officials on Tuesday reinforced the stance that it would be best for the central bank to exercise patience before starting to cut interest rates.

"Investors are sort of just sitting on their hands for today because there are two important things that will be coming out tomorrow, Fed minutes combined with Nvidia earnings, so I don't think people want to make any big bets ahead of that," said Sam Stovall, chief investment strategist of CFRA Research in New York.  He said the Fed was "still very much data-dependent and as a result, they're going to do what the data tells them to do and that's pretty much it, but Wall Street is going to continue to forecast, ourselves included, that the Fed will start to cut rates in September." There's some reasons to be optimistic, but it's just one month.  Markets are currently pricing in a 64.8% chance for a cut of at least 25 basis points at the central bank's September meeting, according to CME's FedWatch Tool, opens new tab.

The Dow Jones Industrial Average (.DJI), opens new tab rose 66.22 points, or 0.17%, to 39,872.99, the S&P 500 (.SPX), opens new tab gained 13.28 points, or 0.25%, to 5,321.41 and the Nasdaq Composite (.IXIC), opens new tab gained 37.75 points, or 0.22%, to 16,832.62.  The Nasdaq notched its fourth record close in the past six sessions while the S&P closed at a record for the first time since May 15.  The S&P 500 traded in a range of about 27 points on the session.

Retailers (.SPXRT), opens new tab were 0.36% lower as a flurry of quarterly reports from the group signals the winding down of earnings season, with Lowe's (LOW.N), opens new tab shares ending lower after the home improvement company warned of operating-margin pressure in the current quarter.  Automotive parts retailer AutoZone (AZO.N), opens new tab declined 3.53% after a third-quarter sales miss.  Macy's (M.N), opens new tab jumped 5.13% after the department store operator raised its annual profit forecast, despite posting a bigger-than-expected drop in sales for the first quarter.  JPMorgan Chase (JPM.N), opens new tab rose 2.01%, recovering some of Monday's 4.5% drop, helping fuel a climb in the S&P 500 banks index.  International Business Machines (IBM.N), opens new tab advanced 2.09% on plans to release a family of artificial-intelligence models as open-source software and help Saudi Arabia train an AI system in Arabic.

Declining issues outnumbered advancers by a 1.07-to-1 ratio on the NYSE and by a 1.35-to-1 ratio on the Nasdaq.  The S&P 500 posted 54 new 52-week highs and six new lows while the Nasdaq recorded 133 new highs and 111 new lows.

Volume on U.S. exchanges was 11.39 billion shares, compared with the 11.87 billion average for the full session over the last 20 trading days.