S&P 500 Above the Flatline Thanks to Nvidia

The S&P 500 benchmark index ended the week near the flatline (+0.03%) thanks to Nvidia's spectacular new performance, up 15% over the week and up 115% year-to-date, as the chipmaker reported strong first-quarter earnings while offering robust revenue guidance for the current quarter. Nvidia is now the third-largest company by market capitalization within the S&P 500. It, alone, accounts for more than half of the benchmark index's performance since the beginning of the year.

Thanks to this surge from the AI champion, the IT sector was the only one truly standing out this week, with a gain of 3.44%. All other S&P sectors showed very disappointing performances amid relatively hawkish comments from the Fed members.

Two sectors have been particularly hit hard. Energy lost 3.82% for the week with the WTI crude oil down 2.92% in the wake of higher-than-expected inventories in the U.S. The real estate sector, known for its sensitivity to interest rate changes, plunged 3.70% on Fed's minutes pointing to interest rates remaining at elevated levels for some time. As shown below, this is the worst performer this year. It is unlikely that this situation will improve in the short term as traders are reassessing the prospects of rate cuts, now anticipating only one reduction by the end of the year, as evidenced by Fed funds futures contracts for December 2024 that closed at 94.93.

It's also worth noting that the Federal Reserve shrank the size of its balance sheet by $103 billion over the past four weeks, compared with a $82 billion reduction over the previous four weeks in April.

Yet, the U.S. central bank had announced plans on May 1st to slow the speed of its balance sheet drawdown to ensure this process does not create undue stress in financial markets.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.