US equities extend rally as Trump-Xi summit opens and Nvidia surges on chip approval
The Dow Jones Industrial Average gained 0.8% as investors weighed geopolitical developments against strong corporate results and shifting bond yields.
US stock markets advanced on Thursday as President Donald Trump and Chinese President Xi Jinping commenced a two-day summit in Beijing, marking the first visit by an American president to China since 2017. The Dow Jones Industrial Average rose 0.8%, while the S&P 500 and Nasdaq Composite climbed 0.3% and 0.2% respectively, following a record-setting session on Wednesday. The rally was underpinned by optimism surrounding the diplomatic agenda, which prioritises trade, artificial intelligence, and the Strait of Hormuz.
Nvidia shares surged more than 2% after the US government approved the sale of its H200 chips to Chinese firms. The approval, which applies to ten Chinese companies, was viewed as a potential easing of export controls, although the long-term impact on US-China technology relations remains uncertain. Nvidia CEO Jensen Huang was among the senior US executives accompanying the president, alongside Tesla’s Elon Musk and Apple’s Tim Cook.
During a meeting at the Great Hall of the People, President Xi Jinping told the delegation of US business leaders that Chinese companies could be “deeply involved in China's reform and opening up” and that the country’s door would “only open wider.” The leaders also held closed-door talks, agreeing that the Strait of Hormuz must remain free of militarisation and tolling, though analysts suggest Beijing is unlikely to exert significant pressure on Iran to resolve the regional conflict.
On the corporate front, Cisco shares jumped after the networking giant reported stronger-than-expected quarterly earnings and announced a restructuring plan involving approximately 4,000 job cuts. CEO Chuck Robbins stated the workforce reductions are part of a strategic shift to position the company for the artificial intelligence era. The company’s fiscal fourth-quarter revenue outlook of $16.7 billion to $16.9 billion significantly exceeded Wall Street estimates.
Market participants also monitored labour data and valuation metrics. Initial jobless claims rose to 211,000 for the week ended May 9, above the previous week’s revised tally of 199,000. Meanwhile, analysts noted that the S&P 500’s earnings yield is currently below the 10-year Treasury yield, creating a negative valuation gap of approximately 110 basis points, the widest since 2003, as bond yields challenge equity valuations.
