Stock market today: Dow, S&P 500, Nasdaq rise after Nvidia earnings, GDP's surprise jump

US stocks advanced as investors weighed a surprisingly strong Q2 GDP growth of 3.3% annualized, rebounding from Q1 due to decreased imports and healthy consumer spending. Nvidia's shares initially dipped despite an earnings beat, but CEO Jensen Huang's assurances of robust AI chip demand and renewed focus on the China market helped alleviate AI bubble concerns. This economic resilience, alongside declining jobless claims, provided market support, though the ongoing dispute between Federal Reserve Governor Cook and President Trump and the upcoming PCE inflation data remain key considerations.

Analysis

U.S. equity markets are showing strength, with the Nasdaq Composite rising 0.5% and the S&P 500 advancing 0.2% towards the 6,500 level, supported by signs of robust economic resilience. The second estimate for Q2 GDP was unexpectedly revised upward to 3.3% annualized growth, a sharp rebound from the 0.5% contraction in Q1 and surpassing the 3.1% forecast. This growth was primarily driven by a decrease in imports, partly a statistical reversal from a Q1 tariff front-running surge, and a healthy increase in consumer spending. The labor market appears stable, with initial jobless claims falling to 229,000. In the corporate sphere, Nvidia (NVDA) shares, though down nearly 1%, stabilized after an initial 4% post-earnings drop. While disappointing data center sales initially weighed on the stock, CEO Jensen Huang's commentary on "extraordinary" demand for Blackwell AI GPUs and a renewed push into the $50 billion China market has helped assuage fears of a bursting AI bubble. However, two key uncertainties remain: the upcoming July PCE inflation report, which is a critical input for Fed policy, and the political dispute testing the central bank's independence.

Key Decisions for Investors

• The surprisingly strong 3.3% Q2 GDP growth suggests underlying economic resilience, which may support risk assets, but the upcoming PCE inflation data on Friday is a critical catalyst that could dictate near-term market direction and Fed sentiment.
• For Nvidia (NVDA), investors should look past the initial negative reaction to data center sales and focus on the forward-looking commentary regarding sustained AI chip demand, while also pricing in the geopolitical risks associated with its renewed strategy for the China market.
• Given the market's proximity to all-time highs and the divergence between the tech-led Nasdaq and the flat Dow, consider reviewing portfolio concentration in the AI theme, which continues to be a primary performance driver.
• Monitor developments concerning the dispute between Federal Reserve Governor Cook and the executive branch, as any perceived erosion of central bank independence could introduce a new layer of systemic risk and market volatility.