Stock Market Update: S&P 500 and Nasdaq Surge as China Stimulus and Chip Stocks Fuel Optimism

U.S. stocks climbed on Thursday, driven by positive economic data, strong earnings reports from Micron (MU), and renewed hopes of economic stimulus from China. Investors are eyeing potential record-breaking highs in the markets as they await comments from Federal Reserve Chair Jerome Powell.

The Dow Jones Industrial Average (^DJI) increased by 0.5%, while the S&P 500 (^GSPC) gained 0.7%, recovering from a slight dip in the previous session. The Nasdaq Composite (^IXIC), which focuses heavily on technology stocks, led the rally with a 1.2% rise, largely due to a strong performance from Micron, which saw its shares jump after releasing an optimistic earnings report.

The market's positive momentum can be attributed to three key factors: growing enthusiasm around AI investments, a robust U.S. economy, and China's recent promises of more economic stimulus. These developments are expected to have a far-reaching impact, potentially boosting U.S. markets.

Micron, a major supplier to Nvidia (NVDA), raised its revenue forecast for the upcoming quarter, citing a surge in demand for memory chips, particularly in AI-powered data centers. This optimism spilled over into the broader chip sector, with stocks such as Nvidia (NVDA), AMD (AMD), ASML (ASML), and STMicroelectronics (STM) also experiencing gains.

In addition to strong earnings, fresh economic data provided further support for the rally. The U.S. government's final estimate for second-quarter GDP growth surpassed expectations, while weekly jobless claims dropped to their lowest level in four months, signaling a healthy labor market.

On the global front, China's top officials announced aggressive measures to revive their slowing economy, pledging to increase fiscal spending, stabilize the property market, and boost stock market performance. As a result, mainland China's CSI 300 (000300.SS) saw significant gains, positioning it for its best weekly performance in a decade.

Anticipation is building around the Federal Reserve’s next interest rate decision. Traders are increasingly confident of a larger rate cut, with odds rising to 60% for a 0.5% reduction at the November meeting, up from 40% the previous week.

As investors await Powell's comments later today, the markets are bracing for Friday’s release of the Personal Consumption Expenditures (PCE) index, a key inflation measure closely watched by the Fed.

In summary, Thursday’s stock market performance highlights strong U.S. economic growth, rising chip stocks, and optimism over global stimulus efforts, setting the stage for potential record highs.