Stocks Soar on Economic Optimism and Chip Sector Surge

US stocks rallied on Thursday, setting the stage for fresh record highs as investors welcomed a slew of positive updates. Solid economic data, Micron's (MU) upbeat earnings, and China's pledges of more stimulus fueled the market's optimism, while investors eagerly awaited comments from Federal Reserve Chair Jerome Powell.

Powering Ahead: Stocks Ride Wave of Positive Sentiment

Dow and S&P 500 Climb, Nasdaq Leads the Charge

The Dow Jones Industrial Average (^DJI) rose 0.4%, while the S&P 500 (^GSPC) added 0.5% after both gauges slipped back from all-time highs in the prior session. The tech-heavy Nasdaq Composite (^IXIC) led the advance, surging about 1% amid a sharp spike in Micron's shares. Investors were buoyed by a triple dose of optimism: the promising outlook for the AI trade, the health of the US economy, and China's stimulus push, which could have far-reaching implications for US markets.

Chip Stocks Shine Bright

Nvidia (NVDA) supplier Micron lifted its next-quarter revenue forecast, citing robust demand for its memory chips used in AI data centers. This news sent shockwaves through the chip sector, with Nvidia, AMD (AMD), ASML (ASML), and STMicro (STM) all rising in the wake of the earnings report. The surge in chip stocks underscored the market's enthusiasm for the AI-driven technology revolution.

Economic Data Beats Expectations

The US economy grew at a 3% annualized pace in the second quarter, outpacing Wall Street's expectations. Additionally, weekly jobless claims unexpectedly fell to the lowest levels in four months, further bolstering confidence in the strength of the American economy. These positive economic indicators reinforced the market's optimism and set the stage for continued gains.

China Unveils Stimulus Measures

China's top leaders signaled a renewed commitment to reviving the country's moribund economy. With new pledges to lift fiscal spending, halt the property crisis, and support the stock market, China's actions sent ripples of positivity through global markets. A big jump in mainland stocks set the CSI 300 (000300.SS) on track for its best week in a decade, further fueling the market's enthusiasm.

Fed Rate Cut Expectations Grow

Helping to buoy the upbeat mood were growing expectations for another jumbo interest rate cut from the Federal Reserve. Traders are now pricing in a 60% chance of a 0.5% move at the Fed's November meeting, up from 40% a week ago. Investors eagerly await Chair Powell's statement later in the day, which could provide further insight into the central bank's monetary policy plans.As the market continues to ride this wave of positive sentiment, investors remain cautiously optimistic, awaiting the highly anticipated reading on the PCE index, the inflation metric preferred by the Fed, set to be released on Friday. With the stage set for further gains, the market's resilience and adaptability are on full display, positioning it for a potential surge to new record highs.