Nvidia Surge Fuels Market Rally, While Fed Signals Rate Cut patience
NEW YORK, May 29 – Nvidia shares soared to a record high on Wednesday, propelling the Nasdaq to its strongest session in over two months, while comments from Federal Reserve officials tempered expectations for near-term interest rate cuts. The tech giant’s stock jumped 17.8%,adding over $200 billion in market capitalization and solidifying its position as the third-most valuable U.S. company.
The market’s reaction underscores a pivotal moment for investors: enthusiasm surrounding artificial intelligence and its potential economic impact is clashing with a cautious Federal Reserve navigating persistent inflation. Nvidia’s gains, driven by strong demand for its AI chips, are lifting the broader tech sector, but the Fed’s signals suggest the path to lower borrowing costs - and continued market gains – may be longer and more uncertain than previously anticipated. This dynamic impacts everything from corporate investment strategies to consumer spending, and will likely define market performance for the remainder of the year.
nvidia closed at $1,224.20, contributing significantly to the Nasdaq Composite‘s 2.53% increase to 18,820.73. The S&P 500 rose 1.03% to 5,307.36, and the Dow Jones Industrial Average gained 0.32% to 38,806.38. The rally followed data released on Tuesday showing a stronger-than-expected increase in new home sales, adding to concerns about sticky inflation.
Adding to the cautious sentiment, Fed Governor christopher Waller stated that he needs to see “considerably more data” showing inflation is moving toward the central bank’s 2% target before supporting a rate cut. He suggested that waiting a few months longer to ease policy is preferable to risking a resurgence of inflation.
“We’ve got time to take the foot off the gas,” Waller said in remarks prepared for delivery at a conference in Washington. “I don’t want to be in a situation where we have to reverse course.”
The comments echoed similar sentiments from other Fed officials, including New York Fed President John williams, who emphasized the need for continued vigilance on inflation.Market participants now see a roughly 68% chance of the Fed cutting rates by September, down from over 70% earlier in the week, according to the CME fedwatch tool.
Despite the Fed’s caution, analysts remain optimistic about the long-term outlook for the market, citing strong corporate earnings and continued economic growth. However, they acknowledge that volatility is likely to persist as investors grapple with the competing forces of AI-driven optimism and monetary policy uncertainty.
Reuters reported that Nvidia’s market capitalization now stands at over $2.5 trillion, surpassing Amazon and closing in on Apple and Microsoft. The company’s success is fueling a broader rally in semiconductor stocks, with advanced Micro Devices and Qualcomm also posting gains on Wednesday.
Jamie McGeever has been a financial journalist as 1998, reporting from Brazil, Spain, New York, London, and now back in the US again. His experience and expertise are in global markets, economics, policy, and investment. Jamie’s roles across text and TV have included reporter, editor, and columnist, and he has covered key events and policymakers in several cities around the world.
