By Sam Goldfarb
Nvidia shares surged again Tuesday, adding to their outsized recent gains on an otherwise lackluster day for stocks.
Still riding high after another blockbuster earnings report last week, Nvidia’s stock climbed 7%, bringing its month-to-date gain to 32% and year-to-date gain to 130%.
News that Elon Musk’s xAI had raised $6 billion in private financing provided an extra boost to Nvidia shares, highlighting the frenzy of artificial-intelligence investment that has turned the chip maker into a market behemoth.
Shares of other chip producers also rose, helping lift the tech-heavy Nasdaq Composite 0.6%. The S&P 500 ticked up less than 0.1% and the Dow Jones Industrial Average dropped 0.6%.
Overall, investors are “digesting what was a pretty good earnings season, ” said Ed Clissold, chief U.S. strategist at Ned Davis Research.
With most S&P 500 companies having reported their first-quarter results, earnings are on track to climb 6% from the previous year, the biggest jump since the first three months of 2022, according to FactSet.
Several companies have also announced stock buybacks or increased dividends, which “reflects confidence on the part of companies that their financial situation is strong and going to continue to be strong,” Clissold said.
Elsewhere, a jump in U.S. Treasury yields weighed on stocks.
The yield on the benchmark settled at 4.542%, according to Tradeweb, up from 4.471% Friday.
Yields, which rise when bond prices fall, began ticking higher after a reading on consumer confidence came in stronger than expected. They climbed further after auctions of 2-year and 5-year Treasury notes were met with soft demand from investors.
Rising yields can drag on stocks by lifting borrowing costs across the economy. They also provide more competition for stocks by increasing the risk-free return that investors can get by holding Treasurys to maturity.
Stocks rallied and bond yields fell at the start of May after data showed a slowdown in U.S. job growth, boosting hopes that the Federal Reserve would cut interest rates this year.
Soon after, data showed some modest cooling in inflation. Yields slid further, with the 10-year yield dropping below 4.4%. Since then, however, yields have crept back upward, reflecting a view among investors that the Fed still needs to see more progress on inflation.
With yields at their current levels, “you’re getting into the caution zone” for stocks, said Dave Grecsek, managing director in investment strategy and research at Aspiriant.
Most sectors in the S&P 500 fell Tuesday. That included financials, with Citigroup slipping 1.8% and Wells Fargo dropping 1.2%.
The S&P 500 is still up 11% this year and 5.4% this month, a rebound from a 4.2% decline in April when investor concerns about inflation were resurgent.
Write to Sam Goldfarb at sam.goldfarb@wsj.com