The Dow Jones Industrial Average fell but other indexes rose amid hopes for a debt-ceiling deal. Nvidia rocketed amid further AI buzz, sending it toward an exclusive club that includes Apple and Microsoft. Ray Dalio stock Costco Wholesale beat earnings views.
Three noteworthy names were among stocks attempting breakouts Thursday. KLA, Monday.com and DoubleVerify are all testing entries.
Treasury yields surged. The 10-year yield rose 10 basis point to 3.82% while the two-year yield spiked 19 basis points to 4.53%, making the yield curve more inverted. The CME FedWatch tool has raised the odds of a rate hike at the June Fed meeting to around 50%.
Debt Ceiling Woes Drag On, Hope Emerges
Debt ceiling negotiations continued to drag on Thursday. Default worries have been acting as a weight on the market.
Top credit rating firm Fitch warned Wednesday it has placed the U.S.' triple-A status on "rating watch negative" amid growing fears of an impasse.
"The brinkmanship over the debt ceiling, failure of the U.S. authorities to meaningfully tackle medium-term fiscal challenges that will lead to rising budget deficits and a growing debt burden signal downside risks to U.S. creditworthiness," Fitch said in a statement.
There was a promising sign after Republican Rep. Kevin Hern of Oklahoma told Reuters he believes it is "likely" that a deal will be struck by Friday afternoon. He said negotiators are now working on the "finer points" of an agreement.
Nasdaq Surges As Small Caps Lag
The Nasdaq fared best out of the major indexes as it closed 1.7% higher. Besides Nvidia, semiconductor design play Synopsys was among the top performers as it soared 9.8%.
The benchmark S&P 500 closed up 0.9%. Monolithic Power Systems was a winner here as it jumped 17.5%.
The S&P 500 sectors closed mixed. Technology was by far the best performer while utilities and energy were the laggards.
Small caps lagged, with the Russell 2000 off 0.7%. Growth stocks finished in the green, though, with the Innovator IBD 50 ETF up 0.5%.
Dow Jones Today: Intel Dives, Microsoft Stock Shines
The Dow Jones Industrial Average closed off session lows but still fell 35 points, or 0.1%.
Intel was the worst Dow performer, falling 5.5%. The chip giant is currently not seen as a big beneficiary from the move to AI.
In contrast, Microsoft, which is seen as an AI leader, led the upside with a gain of 3.8%. Microsoft stock is currently well extended from its most recent buy point.
Nvidia Stock Rockets Amid AI Buzz
Tech stocks were given a shot in the arm after chip giant Nvidia posted a monster earnings report on record data-center sales.
CEO Jensen Huang said his company is ramping up production to meet demand as the chip industry goes "through two simultaneous transitions — accelerated computing and generative AI."
Nvidia stock landed a slate of price target hikes and upgrades, with JPMorgan doubling its price target to 500, amid burgeoning artificial intelligence enthusiasm.
UBS analyst Timothy Arcuri was also bullish, saying the stock is benefiting from an "AI feeding frenzy." He maintained his buy rating and hiked his price target from 315 to 475.
"From a valuation perspective, our EPS went up far more than the stock so we believe it is actually now less expensive than it was into earnings, which opens up some more room to run," he said.
The stock exploded 24.4% higher and is now well on the way to joining the elite $1 trillion market-cap club. Its closing market cap was $938.1 billion, according to Dow Jones Market Data. NVDA stock posted its largest increase since Nov. 11, 2016, when it rose 29.8%.
Other stocks in the $1 trillion club include Microsoft, Apple, Amazon.com and Google parent Alphabet.
Ray Dalio Stock Costco Beats Earnings Views
Costco earnings came in well above views at $3.43 per share but revenue of $53.65 billion was light. Costco stock reversed higher after hours.
Wall Street expected Costco earnings per share to pop 4.7% to $3.32, according to Zacks Investment Research. Revenue was seen rising 3.8% to $54.57 billion.
Costco stock fell initially in extended trading but bounced to a modest gain. It is currently trading below its 50-day and 200-day moving averages.
Despite this, it is forming a consolidation. It is trading far under its potential entry of 564.85, MarketSmith analysis shows.
Hedge fund titan Ray Dalio is a big fan of Costco stock. It is among the top nine holdings of his firm, Bridgewater Associates.
Outside Dow Jones: 3 Bullish Stocks Test Entries
KLA is in a buy zone after clearing a first stage cup base entry of 429.56 today. Big Money has been snapping up KLAC of late, with its Accumulation/Distribution Rating a powerful A- on an A+ to E scale.
Monday.com, which is expanding into AI, came close to a 171.99 buy point. The stock boasts a formidable IBD Composite Rating of 97 and is among the top 5% of stocks in terms of price performance over the last 12 months.
The enterprise software firm recently announced the launch of an AI Assistant and plans to open its platform for AI developers in June.
DoubleVerify is also in a buy zone after clearing an entry at 32.53. It had another entry at 31.41. The payments stock has seen its relative strength line spike. It boasts a perfect Composite Rating of 99.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
