US stocks staged a strong recovery Thursday, with the S&P 500 jumping 1.06% to post its best day in a month as investors weighed remarks from Federal Reserve Governor Christopher Waller, who offered optimism that inflation is showing some signs of slowing. The Nasdaq 100 advanced 1.4%, its biggest gain in a week, even as chip stocks were mostly subdued following Broadcom Inc.'s earnings. Nvidia Corp. climbed 1.8% after agreeing to acquire artificial intelligence startup Hugging Face in a transaction valued at about $13 billion. The market's resilience comes after a downbeat start to the week, with the S&P 500 now positioned to snap a three-day losing streak. Dell Technologies jumped 13% for the biggest gain among S&P 500 stocks after delivering strong second-quarter profits amid accelerating demand for artificial intelligence computing and raising its fiscal year revenue outlook.
Federal Reserve Governor Christopher Waller's comments provided a significant catalyst for Thursday's rally, with his remarks offering optimism that inflation is showing some signs of slowing. Waller stated he observed promising signs of disinflation across the US economy, indicating he could support maintaining benchmark interest rates at current levels at the Fed's next session. Waller said his next decision on interest rates will be 'heavily influenced' by August inflation data due next week, according to Citigroup options-market data. This development has led traders to pare bets for interest-rate hikes in September, as reported by Citigroup. The benchmark equities gauge jumped 1.1% after Waller's comments, with the S&P 500 projected to swing just 0.7% in either direction on Friday, in line with the average realized move on jobs-report days over the past 12 months. The Cboe Volatility Index remained around 14, a level that doesn't typically signal market stress and was more than 20% below its one-year average.
Firm economic cues also benefitted the market mood, with the US Composite PMI Output Index clocking in at 56 in August, up from July's 54.5 and marking the highest reading in 52 months, according to S&P Global. The Services PMI Business Activity Index came in at 56.5 in the reported month, up by 1.9 points from July and reaching a 20-month high. The US Treasury yields fell on Thursday, extending losses from multi-year highs and breaking well under the 4.80% mark. Eight of the 11 sectors in the S&P 500 rose on Thursday, led by gains in consumer discretionary, financials and communication services, while energy, materials and staples fell. Energy shares were the biggest decliners, falling 0.7% as US oil prices were flat after briefly topping $93, marking the latest bout of volatility for crude prices.
Nvidia (NASDAQ:NVDA) remains one of the most important stocks to watch after its latest earnings report, with the stock initially delivering the 70-session move investors were looking for by jumping more than 8% and pushing into the gap zone. However, as reported by Investing.com India, the following session brought a 4.5% decline, moving back into the upside gap created during Thursday's rally. The key level now is the 70-session moving average, with failure to maintain this breakout potentially meaning Thursday's move was a false upside breakout rather than the beginning of another leg higher. The hourly chart provides another level to monitor, with Nvidia currently holding above its 200-session extended moving average, which has previously acted as support. A break below this hourly 200 could increase the probability of Nvidia eventually losing its 70-session moving average on the daily chart.
Major chip stocks surged as much as 6% during Friday's trading session as investors stayed bullish on AI momentum following NVIDIA's acquisition of Hugging Face. SanDisk rose the most, up 6.2% at $1,651, followed by Micron trading 4.27% higher at $999. SK Hynix climbed 3.95% to $170.15, while Intel advanced 3.37% to $94.76. The latest rally comes amid continued momentum over AI trade after NVIDIA's $12.93 billion acquisition of Hugging Face, which will allow the chipmaker to scale Hugging Face's platform and expand access to AI for developers globally. The strong performance came despite mixed broader market conditions, with US job growth for August beating estimates as nonfarm payrolls rose 162,000, according to Bureau of Labor Statistics data. The strong payrolls were driven by a rebound in leisure and hospitality employment and government jobs, with manufacturing payrolls climbing by the most since 2023.
