Hopes for AI and rates push Wall Street to records, even as most stocks fall – WJBF

NEW YORK (AP) Most U.S. stocks fell Thursday, but hopes of upcoming interest rate cuts and Wall Street's continued frenzy over artificial intelligence technology pushed indexes to new records .

The S&P 500 added 0.2% to its all-time high set the day before, even as the majority of its stocks weakened. The Nasdaq Composite Index rose 0.3% from its own record high, led by gains in technology stocks, while the Dow Jones Industrial Average fell 65 points, or 0.2%.

Treasury yields fell again in the bond market as belief grew that inflation was slowing enough to lead the Federal Reserve to cut interest rates later this year.

The latest inflation update showed that prices paid at the wholesale level were not as bad as economists expected. Prices actually fell from April to May, when economists had predicted a rise.

That followed a surprising update on Wednesday that showed consumer inflation was lower than expected. Federal Reserve Chairman Jerome Powell called the report encouraging and said policymakers need more such data before lowering their key interest rate from the most punitive level in two decades.

“It’s a question of when they will cut, not if,” said Niladri Neel Mukherjee, chief investment officer of TIAA Wealth Management.

High interest rates have weighed on certain sectors of the economy, particularly manufacturing. Another report released Thursday shows that more U.S. workers filed for unemployment benefits last week than economists expected, although that number remains low by historical standards.

The hope on Wall Street is that growth in the labor market and economy continues to slow to reduce inflationary pressure, but not so much as to create a deep recession.

Companies whose earnings are most closely tied to the strength of the economy lagged the market Thursday following the release of the reports, such as oil and gas producers and industrial companies.

Dave & Busters Entertainment fell 10.9% after reporting larger-than-expected declines in profit and revenue for the latest quarter, citing a complex macroeconomic environment among other reasons. Other companies have recently detailed a divide among their customers, where lower-income households are struggling to keep pace with persistently high inflation.

Some companies have been able to soar despite pressures on the economy from a continued frenzy around artificial intelligence technology.

Broadcom jumped 12.3% after the semiconductor company reported higher profit than analysts expected for the latest quarter, helped once again by demand for AI. It also raised its revenue forecast this year.

Broadcoms' stock price has soared so high, to nearly $1,700, that it will soon offer nine shares for every one share investors already own in an effort to bring the price down and make it more affordable. This follows a similar move by Nvidia, which has become the poster child of the AI ​​rush and has seen its total market value surpass $3 trillion.

Tesla rose 2.9% after CEO Elon Musk said early voting results indicated shareholders were inclined to approve his compensation package. Without it, Musk had threatened to hand over AI research to one of his other companies.

Overall, the S&P 500 rose 12.71 points to 5,433.74. The Dow slipped 65.11 to 38,647.10 and the Nasdaq rose 59.12 to 17,667.56.

On the bond market, the yield on 10-year Treasury bills fell to 4.24% from 4.32% on Wednesday evening and 4.60% at the end of last month. The two-year yield, which moves more in line with Fed expectations, fell to 4.69% from 4.76%.

Most Fed officials are considering one or two interest rate cuts this year, and traders are hoping that could start as early as September. Such cuts would ease pressure on the economy and boost all kinds of investment prices.

TIAA's Mukherjee said he expects growth in the U.S. economy to continue to slow as spending by low-income households weakens under pressure from dwindling accounts. saving. But he expects the economy to avoid a recession thanks to continued spending by wealthy households with larger investment portfolios and property values, as well as governments and businesses.

For me, the soft landing of the economy, where inflation falls without a deep recession, has already been achieved, he said.

But he moderated his expectations for stocks for the rest of the year after they have already gained so much. The S&P 500 jumped nearly 14%. Additionally, it highlights the risk of tremors in financial markets in the run-up to upcoming elections, including the US presidential showdown.

I would be ready for more electoral surprises, Mukherjee said. I don't know which one, but it seems like the world is full of surprises these days.

European markets have been shaken after recent elections which saw a surprising increase in support for the far right in countries including France and Germany. Volatility has also hit markets recently after investors learned of election results in other countries, such as Mexico and India.

European stocks fell sharply on Thursday as leaders of the Group of Seven major industrialized countries met in Italy. The French CAC 40 fell 2% and the German DAX 2%.

In Asia, Japan's Nikkei 225 index slipped 0.4% ahead of the Japanese central bank's interest rate decision on Friday. Indexes rose in Seoul and Hong Kong.

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AP Business writers Yuri Kageyama and Matt Ott contributed.