Stocks see mild gains after megacap-led rally

Stocks saw mild gains after a rally driven by optimism over Nvidia’s results, which are set to test Wall Street’s fervor around the artificial-intelligence hype.

In a back-to-back advance, the S&P 500 topped 4,400 while the Nasdaq 100 outperformed major benchmarks.

Tesla extended gains after halting its longest losing streak of 2023.

Traders are driving up bullish bets on Nvidia ahead of Wednesday’s earnings report, which could be just as important as Jerome Powell’s speech in setting the tone for the markets this week.

The rally in megacaps gives tech bulls some reasons to be encouraged about how the group will act into the seasonally challenging September/October time frame, but it also puts a lot of pressure on Nvidia to come through with another exceptional earnings report, according to Matt Maley at Miller Tabak.

“The expectations are getting extremely high, Maley said. “This does not mean that their earnings report will not be the catalyst for a nice push higher for the tech stocks once again, but the higher the expectations get, the tougher they become to be exceeded.

“With the continued rise in bond yields, it is going to be essential for Nvidia to report spectacular earnings and guidance again if this correction in the tech sector is going to come to an end any time soon.”

Treasury market saw subsided action on Tuesday, with yields on 10-year bonds edging slightly higher.

The Federal Reserve could lose credibility if it starts changing inflation targets midstream, Richmond Fed President Thomas Barkin said.

“It’s not like 2% is some magical unicorn of a number that we could never hit,” he added.