U.S. stocks edged up on Wednesday, as investors geared up for a major test of the artificial intelligence trade in the form of quarterly results from industry leader Nvidia after the closing bell. 

A sell-off in bonds also stabilized, sending U.S. Treasury yields lower and taking some pressure off equities.  

At 10:26 ET (14:26 GMT), the benchmark S&P 500 index was up 0.5% to 7,393.12 points, the tech-heavy NASDAQ Composite added 0.8% to 26,069.24 points, and the blue-chip Dow Jones Industrial Average climbed 0.4% to 49,572.07 points.

Nvidia’s report ’means everything for this market’

Since the explosion of AI technology in late 2022, Nvidia has become the premier manufacturer of high-end, powerful graphics processing units (GPUs) that powers AI and has come to dominate the AI hardware market. Nvidia’s market capitalization has exploded in the last three years to over $5 trillion, and its quarterly reports have become market-moving events that are closely scrutinized for a read on the AI space.

Many big-name tech companies have outlined plans to spend heavily on building the infrastructure needed to power AI systems, meaning that expectations for Nvidia’s returns are, as usual, sky-high. Shares of the company were last up 1.4% 

NVDA’s earnings report also comes as a time when sentiment has been battered on Wall Street due to a lack of any breakthroughs in the Middle East conflict and a global bond sell-off.

The bond rout was sparked by traders rapidly raising their expectations for interest rate hikes from central banks around the world to combat the emerging inflationary shock from surging oil prices. Against such a backdrop, Nvidia’s performance could potentially be a positive catalyst for stocks.

“Nvidia is the most important AI stock, and since so much of the stock market’s gains over the past few years have been driven by the incredible capabilities of AI, the outcome of Wednesday’s earnings report means everything for this market,” James Demmert, chief investment officer at Main Street Research, said.

“The stock market is near record highs and is now grappling with the sudden and unexpected rise in bond yields, which is essentially a tax on the stock market. This is why Nvidia’s earnings come at just the right time, when the market needs some reassurance that the promise of AI can overpower the headwind of rising bond yields,” Demmert added.

A furious rally in the AI trade has indeed played a driving role in helping Wall Street return to record levels, despite the protracted U.S.-Iran war. Meanwhile, speaking of bonds, U.S. Treasury yields slipped on Wednesday as the sell-off eased. Notably, the U.S. 30-year yield, seen as a gauge of how traders view the economic outlook, on Tuesday soared to levels not hit since the global financial crisis almost two decades ago.

The benchmark U.S. 10-year yield was last down 4 basis points to 4.637%, while the 30-year yield was down 2 basis points to 5.161%.

U.S.-Iran impasse continues 

Turning to the Middle East, hopes remained that the U.S. and Iran may be able to forge a deal to end their more than two-month war.

President Donald Trump told lawmakers on Tuesday evening that the Iran war could end “very quickly.” He said earlier this week that he had postponed planned fresh attacks on Iran at the request of three Gulf countries.

Vice President JD Vance also struck an optimistic tone in separate comments, stating that Tehran wanted to make a deal.

Meanwhile, two Chinese-flagged supertankers carrying oil exited the Strait of Hormuz on Wednesday, Reuters reported, citing LSEG and Kpler shipping data. South Korean-flagged Very Large Crude Carrier Universal Winner is also leaving the narrow waterway off of Iran’s southern coast, which has been effectively closed to tanker traffic since the start of the U.S.-Israeli war on Iran in late February.

Oil prices fell, echoing optimism that crimped supply flows through the strait may be more fully unlocked.

Target sees cost challenges, Lowe’s reaffirms guidance 

Turning to Wednesday’s active stocks, Target slid 6.4%, despite the big-box retailer topping quarterly top- and bottom-line estimates and raising its full-year net sales growth outlook. The company warned of more cost challenges in the first half of this year and harder Y/Y comparisons in the current quarter.

Lowe’s declined 1.9%, as the home-improvement retailer joined larger rival Home Depot in reiterating its fiscal full-year guidance amid record low U.S. consumer sentiment and a pullback in spending on big home projects.

Elsewhere, Analog Devices slipped 3.7% after the group said it would acquire Empower Semiconductor for about $1.5 billion in cash, in a bid to grow its AI-focused power management operations.