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US stocks reversed early gains, as signs of an uptick in business activity in the world’s biggest economy investors countered another set of blockbuster results from chipmaker Nvidia.

Wall Street’s S&P 500 closed 0.7 per cent lower in New York on Thursday, having made small gains to reach a record intraday high earlier in the session. The Nasdaq Composite dropped 0.4 per cent, also retracing an earlier advance.

The reversal followed early or “flash” indices from S&P Global showing signs of acceleration in manufacturing and services industries in the US economy, with a composite index reading coming in at 54.4 for May. That was higher than consensus forecasts of 51.1 and above April’s reading of 51.3. Any figure above 50 signals expansion.

Jobs data released earlier on Thursday showed initial applications for US unemployment fell by 8,000 to 215,000 for the week ending May 18, versus a Reuters consensus estimate of 220,000.

The figures — although better than expected — suggest the labour market remains relatively tight, and sparked a sell-off in US government debt. Yields on interest rate-sensitive two-year Treasuries was up 0.06 percentage points to 4.94 per cent.

Investors have been scrutinising labour market and business survey data for clues about the strength of the US economy, with signs of resilience typically weighing on bets about the probability of Federal Reserve interest rate cuts this year.

As of Thursday afternoon, just one quarter-point rate cut was fully priced in for 2024, in December.

The minutes of the May 1 Federal Open Market Committee meeting, which were released on Wednesday, revealed US officials would be ready to raise interest rates if inflation began to creep higher again.

“The fact that Fed minutes showed a hypothetical openness to hiking rates again, should inflation remain too high, was a bit of a wake-up call,” said Mike Zigmont, head of trading and research at Harvest Volatility Management.

Kristina Hooper, chief global market strategist at Invesco, said the FOMC minutes “threw some cold water” on Wall Street on Wednesday, only for that to be countered by the strong Nvidia results.

“But that was shortlived,” she said, with Thursday’s data serving as a reminder of the hawkishness of the Fed minutes. “I’m not surprised by the reversal . . . It is to be expected given the data. But I am confident the disinflationary process is continuing. No matter how hawkish Fed rhetoric gets, I am still confident the Fed will cut this year.”

Elsewhere, Nvidia shares closed more than 9 per cent higher after the chipmaker announced late on Wednesday stronger than expected earnings, a 10-for-1 stock split and bullish forward guidance.

Nvidia’s update helped push its market value above $2.5tn for the first time.

Investors closely watch Nvidia as the company — now a stock market heavyweight — has repeatedly blown past analysts’ revenue and margin forecasts and emerged as the dominant provider of the graphics processing units that power generative artificial intelligence.

The tech giant’s results on Wednesday were “perfect”, said Charles-Henry Monchau, chief investment officer at Bank Syz. “There was a lot of hype ahead of earnings and the stock price has already doubled since the start of the year [but] they managed to beat by all counts,” he added.

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