Stock markets ignored recent valuation concern warnings from prominent investors and analysts. Nasdaq (QQQ) closed up by 1.12% to 23,043, while the more traditional sector-heavy Dow Jones (DJI) gave up Wednesday’s high of 46,800 to close at 46,601. The government shutdown, now in its second week, did not concern markets.
The FOMC (Federal Open Market Committee) signaled more rate cuts in its meeting minutes. This fueled a rally in Nvidia (NVDA), which added 2%. CEO Jensen Huang said in a CNBC interview that demand in the last six months. Additionally, the GPU chip supplier said that it established a funding agreement for xAI.
xAI is burning substantial cash flow and requires Nvidia’s help. CEO Huang said that he is very “excited about the financing opportunity (that Nvidia is) doing.”
Fed Rate Cuts Ahead
The combination of AI enthusiasm and expectations for more rate cuts lifted stock markets. During September’s meeting, a Fed official weighed the higher risks of weak employment and decided on the cut. Still, inflation remained a concern and is still a worry. Bond markets are pricing in inflationary pressures. TLT ETF pulled back from a $91 high last month to close at $89.25. The 7-10 year Treasury Bond ETF (IEF) indicated a bearish “double top” pattern at around $97, closing at $96.38 to yield 3.42%.
Investors should continue to watch bond yields. Their rise would compete with the stock market. As valuations rise, fearful investors might park their stock gains in bonds.
