Wall Street climbs on US Fed day as Nvidia hits $5 trillion market valuation

The S&P 500 topped 6,900. While tech led gains once again, about 300 shares fell. Nvidia climbed 3%.

Wall Street traders looked past concerns about elevated technology valuations, with the high-profile industry driving stocks toward a fresh record as prospects for another Federal Reserve rate cut bolsters the outlook for corporate earnings.

A renewed tech rally sent the S&P 500 up for a fifth straight day, putting the gauge on track for its longest streak of monthly gains since 2021. While there have been worries about narrowing breadth that could jeopardize the advance in the near term, confidence in the outlook for artificial intelligence kept powering tech megacaps and the broader market.

“AI euphoria continues to drive sentiment,” said Fawad Razaqzada at Forex.com. “While it’s hard to argue against this strong bullish momentum, the rally’s narrow breadth is becoming impossible to ignore. But until tech stocks turn lower, I wouldn’t bet against this rally.”

With optimism about AI running rampant, Nvidia Corp. became the first $5 trillion company as President Donald Trump said he’ll discuss the Blackwell processors with China’s Xi Jinping. Chief Jensen Huang has recently announced various partnerships, dismissing AI bubble talk.

Updates on spending and progress developing the technology are what investors most want to see when tech giants report earnings this week. Microsoft Corp., Alphabet Inc. and Meta Platforms Inc. kick things off with their results Wednesday, with Amazon.com Inc. and Apple Inc. following on Thursday.

Before that, the Fed is expected to cut rates, with Chair Jerome Powell likely offering little guidance amid a divide among policymakers. Traders also see a high chance officials will halt the runoff of Treasury securities from the balance sheet.

“The Fed must end quantitative tightening given the recent disruptions in the overnight lending market,” said Dan Clifton at Strategas. “Continuing QT could lead to an over-draining of reserves, making it more difficult for the marginal buyers of Treasuries to obtain financing.”

The S&P 500 topped 6,900. While tech led gains once again, about 300 shares fell. Nvidia climbed 3%. The yield on two-year Treasuries rose one basis point to 3.50%. The dollar wavered. Gold jumped.

To Louis Navellier, this is probably the biggest day of the year, with the Fed likely heading for another rate cut, and three of the biggest companies reporting.

This will be the fifth time in history that the Fed cuts rates when stocks are at all-time highs, said the Wall Street veteran. In all prior instances, the S&P 500 was higher a year later, he noted.

“At the same time, we’ve never seen such a concentration of performance, where the winners were so large, both in market weight and earnings contribution,” said the chief investment officer of Navellier & Associates. “Big tech is everything right now.”

While the upward momentum in large-cap technology and growth continues, the diverging breadth and underperformance in small- and mid-cap stocks raise concerns about the sustainability of the recent stock market’s advance, according to Craig Johnson at Piper Sandler.

“Investors must remain vigilant within the current uptrend, especially as volatility will likely increase with earnings results and Fed commentary,” he said.

In fact, the previous session was really quite unusual. Since 1990, the S&P 500 has never had an up day with weaker breadth than Tuesday, according to Bespoke Investment Group strategists.

“When we look at this setup against overbought chart conditions which extend across multiple time frames, it continues to imply the potential for elevated volatility into year-end 2025,” said Dan Wantrobski at Janney Montgomery Scott.

While Wantrobski is still looking for the S&P 500 to hit the 7,000 mark this year - with an intermediate-term target toward 7,400 - he notes that markets are still vulnerable to “air pockets, some of which could prove pretty nasty.”

“November may be a target, despite its reputation as one of the best months for stocks,” he said.

Technology’s weight in the S&P 500 has been trending higher since the 1970s, and the sector currently makes up a record share of the index, according to Rob Anderson at Ned Davis Research.

Relative to the long-term trend, the move looks less extreme compared to 2000, he noted. However, the reading is still well into the top quintile of all observations, consistent with sector underperformance one, three, five, and 10-years later, on average.

“It often pays to go against the crowd when sentiment reaches an extreme” and then reverses, which has not yet occurred, he said. “However, the reading suggests risk is elevated for the sector,” Anderson said.

Despite lofty expectations embedded in the stock prices of the members of the “Magnificent Seven” megacaps, market resilience continues, noted Mark Hackett at Nationwide.

“Broader earnings participation and margin strength should help deliver more balanced performance across sectors, reinforcing the case for diversification,” he said.

Investors are experiencing one of the most commanding momentum-driven markets since the Internet, according to Eric Teal at Comerica Wealth Management.

“The AI innovation is viewed as transformative, and the markets forward multiple is reflective of this optimism,” he said.

While technology has sourced the bulk of the market returns and most of the earnings growth, aa Fed easing cycle is now serving as an additional catalyst to spur valuations higher, he said.

Traders have fully priced a quarter-point rate reduction when the Fed announces its decision at 2 p.m. in Washington, with another likely in December. But they will be focused on Powell’s remarks to determine their next move.

Treasuries have largely been stuck in a range in recent days amid a data vacuum resulting from the US government shutdown. The ICE BofA Move Index, a gauge of Treasury volatility, is hovering near levels last seen during the pandemic.

“We expect a total of three 25 basis-point cuts this year, followed by further easing in 2026,” said Seema Shah at Principal Asset Management. “Overall, this should be a gentle cycle, offering enough stimulus to stabilize the labor market and support more vulnerable sectors.”