Surge in S&P 500 and Dow Jones to Historic Highs Fueled by Tech Stocks, Nvidia's Impressive Earnings | Daily Market Analysis

Key events:

• Eurozone - German GDP (QoQ) (Q4)
• Eurozone - ECB's Schnabel Speaks
• Eurozone - ECB's Supervisory Board Member Jochnick Speaks

Investors propelled the S&P 500 and Dow Jones Industrial Average to historic closing highs on Thursday, driven by a surge in interest in growth and technology stocks. This came on the heels of Nvidia (NASDAQ: NVDA), a prominent figure in artificial intelligence, reporting impressive earnings and providing an optimistic outlook.

The S&P 500 experienced its most significant daily gain in 13 months, reaching a record high. Meanwhile, the Nasdaq Composite marked its largest single-session advance in a year, narrowly missing a new record. The Dow Jones Industrial Average surged by 456 points or 1.2%, and the S&P 500 saw a 2.1% increase, closing at an all-time high of 5,085.96. The Nasdaq Composite showed an impressive climb of 3%.

Nvidia's (NASDAQ: NVDA) stock soared over 16%, reaching new record levels following the chipmaker's robust fourth-quarter earnings report. The company forecasted first-quarter revenue of around $24 billion, surpassing analysts' expectations. This optimistic guidance fueled confidence in the growth of Nvidia's data center business, prompting Wedbush to raise its price target on the stock to $850 from $800.

Nvidia's performance also served as an indicator of sustained demand for artificial intelligence, influencing positive outcomes for major tech players such as Alphabet (NASDAQ: GOOGL), Microsoft (NASDAQ: MSFT), and Meta Platforms (NASDAQ: META). All three companies, with AI products in their pipelines, recorded substantial gains.

In the realm of commodities, gold prices exhibited minimal movement in Asian trade on Friday, remaining within a recently established trading range. The prevailing belief that the Federal Reserve would not implement early interest rate cuts in 2024 contributed to this stability.

While gold made some gains during the week, these were largely recuperative after significant losses in the previous two weeks. Concerns about persistent higher interest rates, alongside the strength of the dollar and Treasury yields, limited substantial upside for gold prices.

The outlook for gold remained lackluster as signals from various sources indicated a diminishing possibility of early rate cuts by the Federal Reserve. Fed Governor Christopher Waller emphasized that the bank was not in a rush to cut interest rates early, citing persistent inflation. This sentiment was echoed by other Fed officials throughout the week and was reinforced by the minutes of the late-January meeting.

On the economic front, Thursday's labor data revealed an unexpected decline in weekly jobless claims, underscoring the labor market's resilience. This provided additional justification for the Federal Reserve to maintain higher interest rates.

The Japanese Yen finds itself under pressure against the US Dollar for the third consecutive day, hovering near the weekly low as the European session approaches on Friday. The recent economic data revealing Japan's unexpected plunge into recession last week has led investors to dial back their expectations of the Bank of Japan ending negative interest rates in the coming months. This, coupled with the prevailing risk-on sentiment, acts as a significant factors eroding the safe-haven appeal of the JPY.

Despite this, caution prevails among traders as Japanese officials issue warnings of potential market interventions to curb further weakness in the JPY amidst geopolitical uncertainties. Additionally, the US Dollar struggles to gain substantial momentum, hindering its ability to build on the previous session's moderate recovery from a nearly three-week low. The absence of noteworthy macro data adds another layer of constraint on any substantial upward movement in the USD/JPY pair.

Meanwhile, the Australian Dollar maintains its positive trajectory, influenced by the S&P/ASX 200 index's upward movement following the overnight surge on Wall Street. The encouraging quarterly report from Nvidia has propelled both the S&P 500 and the Nasdaq Composite to achieve new all-time closing highs.

Supporting the Australian Dollar is domestic data indicating a return to growth in private sector activity in February, marking the first positive movement in five months, driven by a robust expansion in the services sector. Additionally, market sentiment surrounding the likelihood of no immediate rate cuts, following the recent Meeting Minutes from the Reserve Bank of Australia, contributes to the positive momentum of the Aussie Dollar.

Shifting focus to the EUR/USD pair, it consolidates after a volatile session triggered by the release of European and US Purchasing Managers Index data on Thursday. The Euro stabilizes around 1.0820 during the Asian trading hours on Friday as investors digest the mixed figures concerning private business activity in the European Union.

Within the Eurozone, the disinflationary trend persists as both Eurozone and German PMI data for February present a mix of figures. Preliminary Eurozone and German Services PMIs show improvement, while Manufacturing PMIs fall short of market expectations.

The ECB Monetary Policy Meeting Accounts for January reveal that policymakers maintain a cautious stance on easing monetary policy, expressing consensus that it is premature to discuss rate cuts at the present meeting. Despite acknowledging progress on inflation and displaying greater optimism, ECB policymakers emphasize that rate cuts are not automatically justified, even if the ECB revises March inflation projections downward.