US stocks edged higher on Wednesday as Nvidia clawed back some of its steep losses from the previous session, helping steady the broader market after renewed doubts about the sustainability of the AI trade.
The S&P 500 rose 0.2%, the Nasdaq Composite gained 0.3%, and the Dow Jones Industrial Average advanced 102 points, or 0.2%.
Nvidia added 0.5%, partly offsetting Tuesday’s sharp decline that came after its expanded partnership with OpenAI fueled concerns about a feedback loop in the AI industry and stretched valuations.
Oracle, another key AI player, also tumbled in the prior session on similar worries.
Micron Technology fell 2% after its results and guidance failed to meet investor expectations, underscoring lingering caution about whether AI demand alone can drive earnings momentum.
The S&P 500 had slipped on Tuesday, snapping a three-day winning streak, even after touching fresh intraday highs.
Market participants are weighing elevated valuations flagged by Federal Reserve Chair Jerome Powell this week alongside upcoming economic data.
Jobless claims are due Thursday, while Friday’s release of the personal consumption expenditures inflation index is expected to guide expectations on monetary policy.
Political risks remain in focus as well, with traders watching the growing possibility of a government shutdown.
President Donald Trump cancelled a meeting with Democratic congressional leaders Chuck Schumer and Hakeem Jeffries that had been aimed at finding a funding resolution before the Sept. 30 deadline.
On the corporate front, Alibaba’s US-listed shares jumped 9.3% after the company pledged increased spending on artificial intelligence and rolled out new models and products.
Mining stocks surged, with Lithium Americas spiking more than 69% on reports that the Trump administration is considering acquiring up to a 10% stake.
Powell’s comments on rate cuts
Federal Reserve Chair Jerome Powell said Tuesday that signs of cooling in the labour market were a key factor behind last week’s interest rate cut, the first of 2025.
Speaking to business leaders in Rhode Island, he cautioned that the Fed faces a “challenging situation” as it works to balance strong employment with stable inflation.
Powell noted there is “no risk-free path” in the central bank’s approach, underscoring the delicate trade-offs ahead.
He also remarked that equity valuations are “fairly highly valued,” though he stressed that the current environment does not amount to “a time of elevated financial stability risks.”
Markets turned lower after his comments, with the S&P 500 ending down and snapping a three-session streak of record closes.
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