Stocks Settle Higher as AI Optimism Lifts Technology Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.80%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.48%.

Stocks on Thursday posted moderate gains, with the Nasdaq 100 climbing to a 1-week high.  Optimism around artificial intelligence (AI) boosted technology stocks and led the broader market higher.  Stocks maintained their gains after weekly U.S. jobless claims came in near expectations, although continuing claims fell more than expected, indicating that laid-off workers are finding jobs. 

On the positive side for stocks, Advanced Micro Devices closed up more than +9% after unveiling its new MI300 accelerator chip, saying the processor can run AI software faster than rival products.  Also, Alphabet closed up more than +5% after Google released Gemini, the “largest and most capable AI model” the company has ever built.  In addition, a rally in regional bank stocks Thursday gave the overall market a boost.

On the negative side, C3.ai closed down more than -11% after reporting Q2 revenue below consensus and forecasting 2024 revenue below consensus.  Also, Veeva Systems closed down more than -2% after forecasting Q4 revenue below consensus. In addition, PayPal Holdings closed down more than -1% after Amazon.com informed its Prime users that it plans to discontinue PayPal’s mobile payment system Venmo as a checkout option, starting Jan 10, 2024.

U.S. weekly initial unemployment claims rose +1,000 to 220,000, right on expectations.  Weekly continuing claims fell -64,000 to 1.861 million, showing a stronger labor market than expectations of 1.910 million.

U.S. Oct wholesale trade sales unexpectedly fell -1.3% m/m, weaker than expectations of +1.0% m/m and the biggest decline in 7 months.

U.S. Oct consumer credit rose +$5.134 billion, weaker than expectations of +$8.500 billion.

The markets are discounting a 1% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024.  The markets are then discounting a 73% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are more than fully discounting (145%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting. 

U.S. and European government bond yields Thursday finished mixed. The 10-year T-note yield rose +0.7 bp to 4.134%.  The 10-year German bund yield dropped to an 8-month low of 2.166% and finished down -0.9 bp at 2.191%.  The 10-year UK gilt yield rose +2.5 bp to 3.968%. 

Chinese trade news was mixed as Nov exports rose +0.5% y/y, stronger than expectations of no change.  However, Nov imports unexpectedly fell -0.6% y/y, weaker than expectations of +3.9% y/y.

German Oct industrial production unexpectedly fell -0.4% m/m, weaker than expectations of +0.2% m/m.

BOJ Governor Ueda told the Japanese parliament that handling monetary policy "will become even more challenging from the year-end and through next year," stoking speculation that the BOJ would soon end its negative interest rate monetary policy.

Overseas stock markets on Thursday settled lower.  The Euro Stoxx 50 closed down -0.21%. China’s Shanghai Composite Index closed down -0.09%.  Japan’s Nikkei Stock Index closed down -1.76%.

Today’s stock movers…

Advanced Micro Devices (AMD) closed up more than +9% to lead gainers in the S&P 500 and Nasdaq 100 after unveiling its new MI300 accelerator chip, saying the processor can run AI software faster than rival products. 

Alphabet (GOOGL) rallied more than +5% after Google released Gemini, the “largest and most capable AI model” the company has ever built.

Walgreens Boots Alliance (WBA) closed up more than +7% to lead gainers in the Dow Jones Industrials.  Technical short covering lifted Walgreens as the short interest in the stock is the highest among Dow Jones Industrial stocks at 6.6% of float, according to S3 Partners.

Regional bank stocks rallied Thursday to boost the broader market. Comerica (CMA) and Zions Bancorp (ZION) closed up more than +3%.  Also, Truist Financial (TFC) closed up more than +2%, and KeyCorp (KEY), M&T Bank (MTB), US Bancorp (USB), Huntington Bancshares (HBAN), and Synchrony Financial (SYF) closed up more than +1%.

Lithium producers rose after the U.S. government’s new rules aimed at limiting China’s grip on the electric vehicle industry came in less stringent than feared.  As a result, Albemarle (ALB) closed up more than +5%.

Semtech (SMTC) closed up more than +16% after reporting an unexpected Q3 adjusted EPS profit of 2 cents, better than the consensus for a loss of -15 cents. 

Cerevel Therapeutics (CERE) closed up more than +11% after AbbVie acquired the company in a deal valued at about $8.7 billion.

Rivian Automotive (RIVN) closed up more than +4% after Stifel initiated coverage on the stock with a buy recommendation and a price target of $23. 

C3.ai (AI) closed down more than -11% after reporting Q2 revenue of $73.2 million, below the consensus of $74.3 million, and forecast 2024 revenue of $295 million-$320 million, the midpoint below the consensus of $308.2 million. 

Veeva Systems (VEEV) closed down more than -2% after forecasting Q4 revenue of $620 million-$622 million, weaker than the consensus of $623.5 million.

Take-Two Interactive Software (TTWO) closed down more than -1% after Bank of America Global Research downgraded the stock to neutral from buy. 

PayPal Holdings (PYPL) closed down more than -1% after Amazon.com informed its Prime users that it plans to discontinue PayPal’s mobile payment system Venmo as a checkout option, starting Jan 10, 2024.

Merck & Co (MRK) closed down more than -1% to lead losers in the Dow Jones Industrials after saying it will stop a Phase 3 trial evaluating Keytruda in combination with Lynparza for the treatment of patients with metastatic non-small cell lung cancer for futility. 

Across the markets…

March 10-year T-notes (ZNH24) Thursday closed up +0.5 of a tick, and the 10-year T-note yield rose +0.7 bp to 4.134%.  Mar T-note prices on Thursday settled little changed.  A sell-off in Japanese government bonds Thursday weighed on T-notes.  The 10-year JGB bond yield rose to a 1-week high Thursday on comments from BOJ Governor Ueda that fueled speculation the BOJ would soon exit its negative interest rate policy.  Also, a bigger-than-expected decline in U.S. weekly continuing unemployment claims shows strength in the labor market that weighed on T-notes.  Losses in T-notes were contained by positive carryover from a rally in 10-year German bunds Thursday to an 8-month high. 

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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