Nvidia rebounds, and it's back to masking losses for the rest of Wall St. (2024)

NEW YORK — A rebound for Nvidia on June 25 propped up a weakened Wall Street.

The S&P 500 rose 0.4 percent Tuesday and neared its all-time high set a week earlier, while the Nasdaq composite leaped 1.3 percent for its first gain in four days. Such strength came even as most stocks outside Wall Street's frenzy around artificial-intelligence technology fell.

The Dow Jones Industrial Average, which doesn't include Nvidia among its member companies, was a laggard and sank 0.8 percent.

Nvidia climbed 6.8 percent, and without that gain, the S&P 500 would have dropped to a loss for the day. The chip company's shares snapped a three-day losing streak where they had lost nearly 13 percent for their worst such stretch since 2022.

It's just one stock, but Nvidia has the power to move the market because it's grown to become one of Wall Street's largest and most influential companies. Voracious demand for its chips to power artificial-intelligence applications has been a big reason for the U.S. stock market's run to records recently, even as the economy's growth slows under the weight of high interest rates. But the AI boom has been so frenzied that it's raised worries about a possible bubble in the stock market and too-high expectations among investors.

The recent struggles for Nvidia haven't caused too many concerns, at least not yet. Part of that is because Nvidia's recent dip over three days was a drip compared with its 1,000 percent surge before that since autumn 2022. Market watchers have also been hoping for more stocks to participate in the rising stock market rather than just Nvidia and a handful of AI winners.

That's what happened Monday, when banks, oil companies and other stocks outside the AI boom rallied as Nvidia sank. But it may be a challenge for such stocks to keep picking up slack from AI darlings depending on how much more the U.S. economy's growth slows.

In financial markets, the focus is starting to swing toward growth and away from just inflation and interest rates, according to Michael Wilson and other strategists at Morgan Stanley.

Pool Corp., a distributor of swimming pool supplies, tumbled 8 percent after it said construction of new pools is falling amid "cautious consumer spending on big ticket items" and cut its financial forecasts for the year.

It was the worst performer in the S&P 500, but Pool wasn't alone. Three out of every four stocks in the index fell.

SolarEdge Technologies dropped 20.6 percent after it said a customer that owes it $11.4 million filed for bankruptcy liquidation, which raises questions about how much the solar-power company can collect and when. The smaller companies in the Russell 2000 index also fell 0.4 percent.

Broadly, sales at retailers across the country have been up and down recently as companies highlight how lower-income customers are struggling to keep up with still-rising prices. The job market, though, still looks mostly solid. A report on Tuesday also showed confidence among U.S. consumers fell this month, but not by quite as much as economists expected.

Upper-income households seem to be doing better, and they're booking trips on cruise ships. Carnival Cruise steamed 8.7 percent higher after it raised its profit forecast for 2024. The Miami-based company said bookings for the rest of the year are the best on record in terms of both price and occupancy. And bookings for next year may end up even better.

In the bond market, the 10-year Treasury yield held relatively steady at 4.23% after mostly falling since late April on hopes that inflation is slowing enough to convince the Federal Reserve to cut borrowing costs later this year.

The Fed has been keeping its key interest rate at the highest level in more than 20 years, hoping to grind down on the economy just enough to get inflation under control. The hope on Wall Street is that the central bank will cut interest rates at the exact right time. If it waits too long, the economy's slowdown could careen into a recession. If it's too early, inflation could reaccelerate.

Investors have been itching for the first cut, with many traders betting on it arriving in September. But stocks don't always rise afterward. Since 1974, the S&P 500 has dropped an average of roughly 20 percent in the 250 days following an initial reduction, according to Wells Fargo Investment Institute.

That's because it matters why the Fed is cutting rates. If it's doing so simply because inflation has slowed enough, that could be good for stocks. But if it cuts because the economy is spinning toward a recession, that's different.