Nvidia, highly acclaimed as the "most important stock on Earth," set a record for a single day increase in stock market value in the history of this planet last night. Along with it, there are undoubtedly benchmark stock indices from around the world
After its stock price surged 16% on Thursday, Nvidia's market value increased by approximately $277 billion in just one day, bringing its total market value to nearly $2 trillion. Nvidia's single day market value growth record pales in comparison to the previous record set by Meta three weeks ago, when Meta's market value grew by over $1970 billion in a single day.
The astonishing performance and stock price of this globally renowned artificial intelligence chip manufacturer undoubtedly sparked a wave of frenzy in the global market on Thursday. After the Nikkei 225 index broke a 34 year high record during the Asian session, European and US stock markets also hit new highs overnight. The nationwide frenzy of major stock indices across the three continents has also pushed the MSCI global index to an unprecedented new height
Market data shows that the MSCI Global Stock Index surged 1.67% overnight, reaching a historic high. The European Stoxx 600 index closed up 0.82% after hitting a historic high during trading, breaking the previous record set in January 2022.
The Stoke Technology sector has risen by a cumulative 12.4% so far this year, reaching its highest level in over 23 years, benefiting from positive profit data released by industry leaders SAP and ASML, both of which have also been boosted by the AI boom.
On Wall Street, the US stock market rose shortly after opening and accelerated its rise later in the day, ultimately leading to a 2.1% rise in the S&P 500 index for the entire day, setting a record for the 12th historical high since 2024. The Nasdaq Composite Index, which is concentrated in technology stocks, jumped by about 3%, outperforming other major stock indices and achieving its largest daily increase in a year. Driven by the stock prices of Microsoft and Salesforce, the Dow Jones Industrial Average also broke through 39000 points for the first time, showing a trend of "trial high" with the Nikkei 225 Index
These sharp rises have shattered the market's pessimistic predictions about the market's prospects for this year and also dispelled doubts from the outside world about whether the so-called "seven giants" of technology can continue to drive the market higher. Seven tech giants, including Google's parent company Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, continued to rise at the beginning of 2024, adding approximately $500 billion in market value on Thursday alone, marking the largest daily increase since 2022.
"Companies around the world are exploring how to use AI to automate simple tasks or make them easier to complete," said Russ Mould, Investment Director of AJ Bell. "These small efficiency improvements can bring huge changes to large enterprises, so continuing to buy is an easy investment decision to make."
Jack Janasiewicz, Chief Portfolio Strategist at Natixis Investment Managers Solutions, pointed out that Nvidia's financial report exceeded market expectations, indicating to skeptics that there is still a lot of room for artificial intelligence themes after the recent rebound. "Perhaps there is still room, I would be happy to sit down and wait," Janasiewicz added.
Is it even less likely that the Federal Reserve will cut interest rates early?
It is worth mentioning that behind NVIDIA's leadership in the global stock market frenzy overnight, one recent characteristic of the market seems to be becoming increasingly apparent: the impact of the Federal Reserve's interest rate expectations on US and even global stock markets is becoming increasingly weak, and the phenomenon of stock bond decoupling is becoming more apparent.
While global stock markets rose overnight, US Treasury prices trembled alone in the cold wind, with yields on multiple maturities hitting new highs for the year on Thursday. Bond yields are inversely related to prices.
As of the end of the New York session, most of the US Treasury bond yields for each maturity period have risen. Among them, the 2-year US Treasury yield increased by 5.8 basis points to 4.722%, the 3-year US Treasury yield increased by 5.3 basis points to 4.494%, the 5-year US Treasury yield increased by 3.4 basis points to 4.336%, the 10-year US Treasury yield increased by 1 basis point to 4.328%, and the 30-year US Treasury yield decreased by 2.3 basis points to 4.456%.
In fact, from the current operational logic of the market, stock market investors seem to be less concerned that the weakening expectation of the Federal Reserve's interest rate cut will exert too much pressure on the US stock market. The positive financial performance data of US companies and the continuation of the AI wave are largely sufficient to provide solid support for the stock market. Even so, the current market logic is actually in the opposite direction. People are not focusing on the possibility that a weakening expectation of the Federal Reserve's interest rate cut may endanger US stocks, but rather on the stock market's frenzy all the way, which may further delay the Fed's interest rate cut.
In other words, in the past, it was stock market investors who were worried that rising bond yields might put pressure on the stock market, but now it is bond investors who need to be afraid. If the stock market rises too much, it will exacerbate the selling off of the bond market. In addition to the large emergence of risk appetite, which will itself intensify the flow of bond market funds to the stock market, the Federal Reserve's fear of cutting interest rates due to the high animal spirit of the market will also put pressure on the bond market, which is causing the "stock rise and bond fall" in the market this year The pattern has become increasingly rooted and rooted.
Many industry insiders have recently stated that against the backdrop of sustained resilience in economic indicators, such a rapid rise in the stock market is clearly not what Federal Reserve officials would like to see.
In the January minutes released by the Federal Reserve this week, Federal Reserve officials also issued a warning - when discussing the uncertainty of the economic outlook, multiple participants mentioned the risk that the restrictive nature of the financial environment has become or may become unsuitable, and this insufficiently restrictive risk may unnecessarily strengthen aggregate demand and lead to a stagnation in inflation progress.
The well-known financial blog website Zerohidge pointed out bluntly, "The higher Nvidia rises, the tighter the credit spread is compressed, and the more investors attracted by MOMO (momentum trading) and FOMO (fear of missing out) will chase this emotion, and the longer the Federal Reserve stands by and does not cut interest rates."
As shown in the figure below, on Thursday, as the Nasdaq hit a new high, the expectation of the Federal Reserve cutting interest rates for the year was further weakened.
John Luke Tyner, fixed income analyst and portfolio manager at Aptus Capital Advisors, said, "If the Federal Reserve doesn't cut interest rates, it's really hard to see a significant decline in longer-term yields."
"As long as there is still a demand for high-risk assets, funds will be attracted to withdraw from the safest part of fixed income products, and its duration may exceed rational limits," said George Goncalves, head of US macro strategy at Mitsubishi UFJ Securities Americas