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May 25, 2024 Market Update

The U.S. stock market eked out a tiny gain for the week, but it was enough to keep the winning streak alive, if only just barely.  The S&P 500 Index rose 0.03% for the trading week through Friday’s close.  The slight increase marks the fifth straight weekly advance.

The bond market’s rally ran out of steam, however, based on the Vanguard Total Bond Market ETF (BND), a proxy for investment-grade U.S. corporate and government fixed-income securities.  After three straight weekly gains, BND ticked lower for the week, dropping 0.19%.

The Federal Reserve released the minutes from its most recent Open Markets Committee meeting on Wednesday morning.  These minutes revealed growing concerns among committee members about the lack of recent progress in reaching the Fed’s 2% inflation rate target.  It now seems clear that America’s central bankers are prepared to keep interest rates higher for longer than previously indicated.

Later that day, Nvidia’s earnings report overshadowed the Fed’s release.  The AI chip maker, whose stock is among the most closely watched in the world, posted its first-quarter earnings after the market closed on Wednesday.  The impressive report significantly exceeded analyst expectations.

Nvidia’s revenue more than tripled to $26 billion in the first quarter of the year, and the company forecasts second-quarter revenue of around $28 billion.  Chief Executive Officer Jensen Huang described this period as “the beginning of a new industrial revolution.” 

Investors certainly agree, given the dramatic rise in the share price.  Year-to-date, Nvidia (NVDA) surged 115% through Friday’s close, building on 2023’s stellar 239% return.  That’s a world above the U.S. stock market’s 11.2% rise so far this year, based on the S&P 500.

Bloomberg’s John Authers recently noted that the S&P 500’s price/earnings ratio has closely tracked Nvidia’s stock price since the chip maker’s impressive earnings report around this time last year.  It remains to be seen whether this high correlation will continue.  If it does, Wednesday’s announcement could further fuel this year’s stock market rally.

That’s all for now.  Have a great weekend, and invest wisely my friends.