AI Boosts Tech Shares, Markets Struggle
Nvidia's stocks have risen by about 25%, thanks to the increased demand for its complex chips due to the introduction of AI applications.
The stock markets around the world were unstable on Thursday because of the ongoing US debt crisis and Germany's recession. However, technology company stocks spiked with Nvidia's successful earnings report due to AI advancements.
Different stocks on Wall Street had different performance. The Dow went down. A ratings agency called Fitch is worried about the US government's credit rating. They put it on "rating watch negative." The worry is because there are problems with raising the debt ceiling.
ACY Securities' chief economist Clifford Bennett cautioned that the consequences would be significant if there was a default.
Bennett stated that the impact of the market shock will be significant and last for many years.
Bond prices in the US and globally are expected to decrease. Initially, the US dollar could strengthen thanks to its status as a safe-haven and higher yields in the long-term. However, the stock market could experience a significant drop.
Fitch gave a warning about the US rating. They said it's because of political disagreements. Resolving the debt limit is hard. There's a deadline coming.
The announcement may cause a ratings downgrade. It would be the first time since S&P Global did it in 2011. They had a similar situation back then.
The US Treasury Department announced that June 1 is the "X-date". This date marks when the government will have no more money. If this happens, it could lead to a default with harmful results for the economy.
President Joe Biden and Republican House Speaker Kevin McCarthy had a productive talk earlier this week. However, little progress has been made since then. The Republicans are asking for spending cuts while the Democrats want a "clean" increase to the debt limit.
Experts believe that an accord will be agreed upon, but investors are getting worried and avoiding risk.
The Nasdaq went up after Nvidia's good earnings report. The report showed that people want more of Nvidia's smart chips because of the trend of artificial intelligence.
Analyst Alex Coffey of TD Ameritrade said the company is one of the few tech stocks helping to boost major indexes this year.
Nvidia's stocks went up by 25% when Wall Street opened on Thursday. This increase made Nvidia's market worth almost $1 trillion.
Michael Hewson, who is the chief market analyst at CMC Markets UK, stated that the chip sector got a boost from the firm's upgraded results and guidance. AMD and TSMC gained from this, and even Microsoft saw some gains.
Germany is experiencing a recession. The country's economy is shrinking. This is the first time in six years. The decline is due to weaker demand for exports. There are also trade tensions and uncertainty surrounding Brexit. The government is considering stimulus packages to boost the economy.
The Frankfurt DAX lost 0.3 percent. The London FTSE 100 dropped 0.7 percent. The Paris CAC 40 slipped 0.2 percent. The markets in Europe went down.
Germany's economy shrank 0.3 percent in Q1, entering a recession. The economy had previously shrunk by 0.5 percent in the last quarter of 2022.
The Euro went down to $1.0714, which is a two-month low. But it got better afterwards.
Scope Markets analyst Joshua Mahoney said that the mood in Germany was not good this morning. He added that the downturn in Germany's economy was influenced by a drop in household spending and government expenditures.
Some people think Europe's largest economy is going to slow down. This could be bad for other countries nearby. But other people think it's not so bad. They think higher prices are stopping people from buying things. That will help keep prices from going up too much.
Asian stocks went down because they are worried about the US likely defaulting. Oil prices also decreased due to people taking profits after three days of gains.
Some important numbers at 3:30 PM (GMT): - The Dow Jones Industrial Average was up 150 points. - The S&P 500 increased by 0.78%. - The Nasdaq Composite rose 1.02%. - Oil prices were up by 0.9%. - Gold prices were down by 0.23%.
The Dow in New York fell by 0.5% to 32,627.08 points.
The DAX in Frankfurt fell by 0.3 percent. It closed at 15,793.80.
The London FTSE 100 fell by 0.7 percent. It closed at 7,570.87.
The CAC 40 in Paris went down by 0.2 percent. The close was 7,229.27.
The EURO STOXX 50 went up by 0.1 percent. It closed at 4,269.64.
The Nikkei 225 in Tokyo went up by 0.4 percent. It closed at 30,801.13.
The Hang Seng Index in Hong Kong went down by 1.9 percent. It closed at 18,746.92.
The Shanghai Composite closed down by 0.1%. It ended at a value of 3,201.26.
The euro/dollar is currently at $1.0720. This is a decrease from Wednesday's rate of $1.0750.
The pound/dollar has decreased from $1.2365 to $1.2323.
The dollar/yen exchange rate has increased to 139.81 yen. It was previously at 139.47 yen.
The Euro/pound has increased. It went up to 87.01 pence. Before, it was at 86.94 pence.
The price of West Texas Intermediate dropped by 3.0 percent. It is now at $72.10 per barrel.
Brent North Sea crude is down 2.0% at $76.15 per barrel.
