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Financial Markets 06/10 15:39
NEW YORK (AP) -- Another sell-off for artificial-intelligence stocks helped
drag the U.S. market sharply lower Wednesday, as Wall Street's former
superstars continue to face heavy scrutiny for their success.
The S&P 500 dropped 1.6% for its first back-to-back drop in three weeks and
is back to where it was in early May. The Dow Jones Industrial Average tumbled
953 points, or 1.9%, and the Nasdaq composite led the market lower with a 2%
slide.
Wall Street has been shaky since last week, when AI stocks went from roaring
to records to suddenly turning lower. Among the worries is that their prices
have simply shot too high, too fast because of AI mania. The question now is
whether the break lower has cleared out excessive optimism that may have built
into their stock prices, or if it's the start of a longer downturn.
Super Micro Computer, which sells AI servers, tumbled 28% after saying late
Tuesday that it plans to raise $7 billion in cash by selling shares of stock
and convertible preferred stock. Such moves raise the most money for companies
when their stock prices are high, and they can dilute the ownership stakes of
existing shareholders.
Micron Technology swung from an early loss of nearly 4% to a modest gain and
back to a loss of 4.7%. It's coming off a wild stretch where it sank 7.7% last
Thursday, then plunged another 13.3% Friday and rallied 9.9% Monday. Despite
all the swings, the computer memory maker's stock is still up 212.5% for the
year so far.
Nvidia, the chip company that's grown into a nearly $4.9 trillion behemoth
because of the AI boom, was the heaviest weight on the S&P 500 after falling
3.7%. The second-heaviest was another AI winner, Broadcom, which fell 5.1%.
Some of the pressure on AI stocks could also be coming from investors
pulling cash out to prepare for high-profile debuts on the U.S. stock market
for several AI giants. SpaceX's initial public offering could come later this
week, for example.
Weakening stocks for companies with big fuel bills also pulled the market
lower. United Airlines sank 6.2%, and cruise-operator Carnival fell 6.3% after
oil prices rose due to the latest fighting in the war with Iran.
The price for a barrel of Brent crude oil rose 1.8% to $93.10 after
President Donald Trump warned Iran would "pay the price" for stalled
negotiations between the two on their war. The war has been keeping the Strait
of Hormuz effectively shut to oil tankers, which has prevented the delivery of
crude from the Persian Gulf to customers worldwide.
High oil prices have sent inflation higher, and a report on Wednesday showed
that prices for U.S. consumers jumped in May at the highest speed in three
years.
But Treasury yields nonetheless held relatively steady in the bond market
because the figures were pretty much exactly what economists had forecast. The
rise in an important underlying measure of inflation, meanwhile, was not as bad
from April through May as economists expected.
The yield on the 10-year Treasury edged up to 4.54% from 4.53% late Tuesday.
The two-year Treasury yield, which more closely tracks expectations for what
the Federal Reserve will do with its overnight interest rates, held at 4.13%.
Traders have been building bets recently that the Fed will have to hike its
main interest rate at least once this year, given how high inflation is and how
strong the U.S. job market remains. Wednesday's inflation update didn't sway
them much, according to data from CME Group.
High yields can slow entire economies and undercut prices for all kinds of
investments, including stocks and cryptocurrencies. They hit investments seen
as the most expensive in particular, and some critics are calling AI a bubble
where investment inflated too far.
All told, the S&P 500 fell 119.66 points to 7,266.99. The Dow Jones
Industrial Average dropped 953.33 to 49,918.78, and the Nasdaq composite sank
509.32 to 25,169.50.
In stock markets abroad, indexes in Europe were mixed following sharper
drops in Asia.
South Korea's Kospi tumbled 4.5%, hurt by losses for tech giants Samsung
Electronics and SK Hynix.
Tokyo's Nikkei 225 sank 1.9% after data showed Japan's producer price index,
a measure for prices at the wholesale level, rose in May at the fastest pace in
more than three years. Shares of technology and telecommunications giant
SoftBank Group, which has a strong AI focus, lost 8.3%.
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AP Business Writers Chan Ho-him and Matt Ott contributed to this report.
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