Wall Street experienced significant volatility on Tuesday due to fluctuations in artificial intelligence stocks. The S&P 500 index decreased by 0.3% after initially gaining 1% and then dropping 2.3% during midday. This movement followed its peak a week ago. Meanwhile, the Dow Jones Industrial Average rose 86 points or 0.2%, whereas the Nasdaq composite saw a 1% decrease.
The market downturn was driven by losses in companies related to AI advancements, specifically those producing computer chips and memory. Micron Technology exemplifies this volatility, initially increasing by 4% before a drastic 10% fall, ultimately closing with a 1.4% decline. This shift occurred after a 9.9% surge the previous day and a 13.3% drop two days earlier. Despite these changes, Micron’s stock value has tripled this year, leading to skepticism about its rapid ascent.
On Monday, OpenAI, known for producing ChatGPT, announced plans for an initial public offering by filing confidential documents. Similarly, SpaceX is anticipated to launch its IPO soon. Though AI stocks faced challenges, lower oil prices offered some respite. Brent crude oil prices fell by 3% to $91.45 per barrel as speculation about a potential U.S.-Iran agreement to reopen the Strait of Hormuz fluctuates. This could ease oil supply constraints, bringing relief if tankers resume operations from the Persian Gulf.
Despite falling oil prices, they later regained ground after President Donald Trump accused Iran of downing a U.S. military helicopter near the Strait. In the shadow of high oil prices and tension with Iran, inflation continues to accelerate, affecting U.S. consumers. This scenario has also driven up global bond yields, creating pressure on stock valuations. On Tuesday, Treasury yields dipped slightly as oil prices softened, with the 10-year Treasury yield reducing to 4.52% from 4.56%, though still high compared to pre-conflict levels.
Inflation reports are expected later this week, with consumer price data on Wednesday and wholesale figures on Thursday. Considering persistent inflation and a robust job market, many expect the Federal Reserve to increase its key interest rate by year-end. Higher rates aim to control inflation but might slow economic growth, potentially impacting stock prices and other investments.
The average long-term mortgage rate in the U.S. recently reached a nine-month peak. Elevated borrowing costs might deter investment in AI data centers, crucial for U.S. economic growth. As oil prices fell, airline stocks saw gains, with American Airlines up by 3.6% and Delta Air Lines by 3.8%. J.M. Smucker saw a 10.4% increase after surpassing profit expectations, driven by higher prices for coffee and baked goods. Such performance is part of a broader trend of unexpected profit growth among U.S. companies, boosting the S&P 500 index.
Nuvalent shares soared by 39.3% following GSK’s agreement to acquire the company for $10.6 billion, while GSK’s New York-traded shares rose by 1.2%. By day’s end, the S&P 500 dipped by 19.08 points, resting at 7,386.65. The Dow Jones Industrial Average increased by 86.10 to 50,872.11, and the Nasdaq composite decreased by 250.84 to 25,678.82.
In global markets, European indexes decreased following more pronounced changes in Asia. South Korea’s Kospi index rebounded 8.2%, nearly offsetting an 8.3% decline on Monday, largely influenced by major tech companies like SK Hynix and Samsung Electronics.
Report by AP Business Writers Matt Ott and Elaine Kurtenbach