It looked like it was all going according to plan: Nvidia, the hero of the S&P 500 this year, posted blowout earnings late Wednesday, sending the stock and index futures skyward in the Thursday premarket.
“By all accounts, stocks should have rallied,” said Tom Essaye, the founder of Sevens Report Research, pointing to Nvidia’s results—what initially looked like yet another opportunity for the chip maker, a key beneficiary of this year’s frenzy over artificial intelligence, to lead the market higher. “Instead, stocks didn’t just not rally, they reversed an early rally…Thursday was an ugly day in the markets,” said Essaye.
Neither investors nor AI optimism can fight the Fed, and the most important force for risk-sensitive assets remains the pathway for interest rates, which remain at a generational high. When rates are elevated—sending bond yields up, too—investors can earn a cool 5% on risk-free Treasuries, giving them fewer incentives to pile into riskier bets such as tech stocks.
So, while Nvidia earnings were great, they just weren’t enough to overcome data from durable goods orders and weekly jobless claims that firmed up bets that rates will stay higher for longer.
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