Nvidia Earnings Fuel Wall Street Rally: AI Stocks Soar, Fed Rate Cut Hopes Rise & Walmart Shines on Strong Q3

Wall Street experienced a significant upturn on Thursday, marking its most robust performance since May, primarily driven by a stellar earnings report from AI chip giant Nvidia. This surge helped alleviate lingering concerns about the sustainability of artificial intelligence stock valuations and the Federal Reserve's future interest rate policy.

The S&P 500 index climbed 1.9%, putting it within 2% of its all-time high. The Dow Jones Industrial Average rose 712 points (1.5%), while the Nasdaq composite saw an impressive 2.5% increase by mid-morning Eastern time.

Nvidia's Blockbuster Performance Fuels Optimism

Nvidia’s latest profit report for the summer quarter exceeded analysts' expectations, coupled with an optimistic revenue forecast. This strong showing countered fears of an AI stock bubble, demonstrating the company's ability to justify its high valuation through continued growth and profitability. Nvidia shares themselves rose 3.8%, recovering some recent losses. As the largest U.S. company by market value, Nvidia's performance has a profound impact on the S&P 500. Analysts from UBS highlighted that the "AI infrastructure tide is still rising so fast that all boats will be lifted," suggesting broad-based growth in the sector.

Widespread Gains in the AI Sector

Indeed, the enthusiasm spilled over into other AI-linked stocks. Broadcom saw a 5.9% gain, and Palantir Technologies increased by 3.4%, underscoring the widespread optimism surrounding artificial intelligence development and adoption.

Federal Reserve and Job Market Insights Offer Hope

Another source of market relief came from mixed U.S. jobs data. While September's employer hiring figures were stronger than anticipated, indicating economic resilience, a slight rise in the unemployment rate offered a glimmer of hope for potential Federal Reserve interest rate cuts. Traders, according to CME Group data, assigned a roughly 44% probability to a December rate cut, an improvement from 30% the day prior. Lower interest rates are generally favored by Wall Street as they boost investment and economic activity, though the Fed must balance this against its inflation target of 2%. Smaller companies, in particular, benefit from lower borrowing costs, evidenced by the Russell 2000 index's 2.2% jump.

Walmart's Strong Quarter and Strategic Listing Change

Beyond tech, retail giant Walmart contributed to the market's positive momentum. Its stock surged 6.3% following a standout quarter with sales and profits surpassing Wall Street's forecasts. The company successfully attracted budget-conscious consumers amid economic uncertainties. Walmart also announced a significant strategic move: transferring its stock listing from the New York Stock Exchange to the Nasdaq, retaining its "WMT" ticker.

Global Market Reactions and Bond Movement

The positive sentiment extended internationally, with stock indexes rallying across Europe and Asia. Japan's Nikkei 225 climbed 2.6%, and South Korea's Kospi gained 1.9%, reflecting global investor confidence. In the bond market, the yield on the 10-year Treasury slightly eased to 4.11% from 4.13%.

This combination of strong corporate earnings, particularly from the booming AI sector, and renewed optimism regarding the Fed's monetary policy, fueled Wall Street's strongest day in months, signaling a potential shift in market sentiment.