Tech Stocks Rally on Nvidia’s Earnings Report; Bonds Fall as Treasury Yields Rise

The Dow (-1.0%), NASDAQ (+2.5%), and S&P 500 (+0.4%) were mixed for the week.  Taxable and tax-free municipal bonds were down about 0.6% - 0.7% for the week.  Bond losses were triggered by the 10-year Treasury yield rising to 3.81%, its highest yield since March when the yield dropped sharply due to the bank failures.

The news last week was centered around two items – the debt ceiling and Nvidia’s blockbuster earnings report.  For the past two weeks, the markets have been rather lackluster, fearing that if an agreement to raise the debt ceiling wasn’t made that it could trigger a financial crisis.  While most investors believed a deal would occur, the fears still remained.  Over the weekend, an agreement was made between President Biden and Speaker McCarthy, alleviating some of those fears.  However, Congress must still approve the deal for the debt ceiling to be raised.

In stock news, Nvidia’s extraordinary earnings report, coupled with an exceptional outlook caused that stock to soar over 25%.  Nvidia stated that their earnings are associated with their role in making chips used in artificial intelligence (AI).  As a result, most other technology companies heavily involved in AI were also up sharply, as evidenced by the big rise in the tech-heavy NASDAQ.  As noted in last week’s market recap, the stock market gains this year have almost exclusively been associated with the gains of just a small handful of companies.   As evidenced by the chart below, the 20 largest companies in the S&P 500 represent about 29% of the index, yet those same 20 companies have accounted for 94% of the index’s gains this year, and that was BEFORE last week’s sharp gains in many of those tech stocks.

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