Stocks took a hit on Thursday as concerns over inflation overshadowed a surge in Nvidia shares after the company announced a strong revenue forecast. The Dow Jones Industrial Average experienced its worst day of 2024, sliding 605.78 points or 1.5% to 39,065.26. The S&P 500 also experienced a loss of 0.7%, while the Nasdaq slipped 0.4%.

Nvidia shares, however, saw a significant boost, climbing above the $1,000 per share mark and increasing by 9%. This helped to push the Nasdaq and S&P 500 to intraday records in the early stages of trading. The AI chip company's positive forecast for quarterly revenue, which exceeded estimates, and the announcement of a stock split contributed to the surge in shares.

Despite Nvidia's positive performance, stocks generally lost ground as new economic data revealed increased price pressures in the United States during May, indicating that inflation remains a concern. This data was released alongside reports of improved business activity and lower weekly jobless claims, suggesting a strong labor market. Some experts have suggested that this unexpected turn of events may be due to investors positioning themselves for disappointing growth data and slower inflation.

Brian Nick, a Senior Investment Strategist at The Macro Institute in New York, noted that the market's response to any positive news is still being seen as negative due to concerns over interest rates. He explained that the market is currently in a period of relief rally, where stability in interest rates is appreciated, but any further increases could be detrimental.

The recent rally in equities and record highs have been fueled by optimism surrounding artificial intelligence, solid earnings performances, and hopes for future rate cuts by the Federal Reserve. Nvidia shares, in particular, have seen an impressive 11% increase this year, following a remarkable surge of approximately 240% in 2023.

Market expectations are now suggesting a 52.2% likelihood of a rate cut of at least 25 basis points in September, which is down from nearly 67% a week ago, according to CME's FedWatch Tool. This shift in expectations may have contributed to the overall decline in stocks.

The Dow's decline was partly attributed to Boeing's tumble of over 7% after the planemaker forecasted negative free cash flow in 2024 due to sluggish deliveries. On the other hand, DuPont announced plans to split into three publicly traded companies, resulting in a moderate increase of 0.5% in shares.

In conclusion, despite Nvidia's strong revenue forecast and surge in shares, concerns over inflation gave way to a general decline in stocks. The market's response to positive news remains cautious, indicating that a period of interest rate stability is preferred.