Taiwan Semiconductor, or TSMC, makes the chips for Nvidia and others that have been driving the business world’s rush into artificial-intelligence technology. The promise of big profits in the future from AI has sent Nvidia in particular to breathtaking heights over the last year, and Nvidia rose another 2.4% Wednesday to bring its gain for the year so far to 171.5%. It was again the strongest single force pushing the S&P 500 upward.
The frenzy around AI has been a major reason the U.S. stock market has climbed to records despite a slowdown in the economy’s growth and a tightening squeeze on lower-income households. So have hopes that inflation is slowing enough for the Federal Reserve to deliver much-sought cuts to interest rates later this year.
Fed Chair Jerome Powell returned to Capitol Hill to give testimony about interest rates, where he echoed his comments from a day before when he said again he was aware of the risks of waiting too long to cut rates.
The Fed is trying to pull off a difficult tightrope walk where it keeps rates high to slow the economy enough to get inflation fully under control without overdoing it and causing a recession. Much of Wall Street is expecting the Fed to begin cutting its main interest rate in September, down from the highest level in more than two decades where it’s stood for nearly a year. But traders have a long history of being premature in their calls for cuts to rates.
Powell gave a nod to the improving data on inflation following a discouraging run earlier this year, but he again said the Fed doesn’t yet have enough confidence that inflation is sustainably heading down toward its goal of 2%.
“More good data would strengthen our confidence,” Powell said.
The yield on the 10-year Treasury edged down to 4.29% from 4.30% late Tuesday and from 4.70% since April. The move since the spring is a significant one for the bond market and offers support for stock prices.
The two-year Treasury yield, which moves more on expectations for Fed action, edged down to 4.61% from 4.62% late Tuesday.
A report coming on Thursday could cause more dramatic swings in the bond and stock markets. That’s when the U.S. government will release the latest monthly update on inflation. Economists expect it to show U.S. consumers paid prices for food, airline tickets and everything else that were 3.1% higher in June than a year earlier. That would be a touch slower than May’s 3.3% inflation rate.
Later this week will also bring the unofficial start to the latest earnings reporting season. Delta Air Lines, JPMorgan Chase and others will report how much profit they made during the spring from April through June, and the hope on Wall Street is for S&P 500 companies to deliver the strongest growth in more than two years.
Smart Global Holdings, a technology company with computing, memory and LED businesses, rose 18% after it reported stronger profit and revenue for the latest quarter than analysts expected.
On the losing end of Wall Street was LegalZoom, which fell 25.7%. It said its CEO, Dan Wernikoff, is leaving the company and resigning from its board. The company also cut its forecast for revenue over the full year.
In stock markets abroad, Japan’s Nikkei 225 rose 0.6% to close at another record. It’s jumped 25% so far this year, even more than the U.S. stock market, as AI enthusiasm has pushed up its technology stocks. Its exporters are also benefiting from the yen’s falling value against the dollar, which can boost their profits.
Other markets in Asia were mixed, while European indexes were higher.
___
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.