Stan Choe
Most of the US stock market rose after oil prices eased back to where they were before the war with Iran, but drops for stocks swept up in the mania around artificial-intelligence technology kept the market in check.
The S&P 500 finished nearly flat and slipped less than 0.1 per cent to close out just its second losing week in the last 13. The Dow Jones Industrial Average dipped 44 points, or 0.1 per cent, and the Nasdaq composite fell 0.2 per cent. The Australian sharemarket is set to rise, with futures on Saturday pointing to a gain of 16 points or 0.2 per cent at the open., The Australian dollar was trading at US69.06¢.
Stocks got a boost as the price of Brent crude oil, the international standard, dropped 3.8 per cent to $US72.60. That’s lower than it was the day before the United States and Israel attacked Iran, which eventually led to the closure of the Strait of Hormuz and the curtailment of oil shipments worldwide.
The easier oil prices helped stocks of companies with big fuel bills, and American Airlines Group climbed 1.7 per cent.
Health care stocks, meanwhile, were some of the strongest forces pushing upward on the market after a committee of the European Medicines Agency recommended several medicines for approval and the extension for another dozen of their therapeutic indications. That included one for Eli Lilly, whose stock jumped 7.1 per cent.
Besides Lilly, nearly two out of every three stocks within the S&P 500 rose. But more drops for AI stocks helped to overshadow them.
After soaring to tremendous heights and leading the market for years, AI stocks have been under pressure recently because of worries their profits can’t possibly keep pace with the tremendous rallies for their stock prices. And those drops have an outsized effect because AI stocks have become Wall Street’s largest and most influential, giving movements for their stock prices more weight on indexes than others.
Micron Technology’s drop of 6.7 per cent was the heaviest weight on the market, for example. The maker of memory for computers has been a big winner this year, with its stock roughly quadrupling, because the AI boom has created a surge of demand for its products.
But investors saw the downside of that surge Thursday, when Apple said it had to raise prices on laptops and other products by significant percentages to make up for the increases in memory prices. The worry is that such higher prices could ultimately lead to lower demand.
Highlighting the roller-coaster ride that AI stocks have been on, SpaceX briefly dropped 2.9 per cent in the morning and fell below $US149. It then erased the loss to swing to a gain of 3.5 per cent before finishing with a modest rise of 0.2 per cent.
After initially selling its stock at $US135 apiece in its ballyhooed initial public offering earlier this month, SpaceX’s price briefly soared above $US225 within its first few days of trading. Besides rockets, Elon Musk’s company also owns the xAI artificial-intelligence business.
The day’s largest loss in the S&P 500 was a 23.7 per cent drop for ON Semiconductor, which said it agreed to buy Synaptics in an all-stock deal valued at roughly $US7 billion ($10.1 billion).
All told, the S&P 500 slipped 3.47 points to 7,354.02. The Dow Jones Industrial Average dipped 44.51 to 51,876.11, and the Nasdaq composite fell 60.99 to 25,297.62.
In the bond market, Treasury yields eased with oil prices. The yield on the 10-year Treasury fell to 4.37 per cent from 4.40 per cent late Thursday.
It fell after a report showed expectations for inflation in the coming year inched down among US consumers to 4.6 per cent from 4.8 per cent in May. That’s still high, but moves downward mean less chance of a vicious cycle where expectations for higher inflation drive changes in behaviour that create higher inflation.
High yields in bond markets worldwide caused by worries about inflation have been threatening to slow economies, and they have already sent rates higher for mortgages and other kinds of loans. High yields also hurt prices for investments, particularly those seen as the most expensive. That raises the pressure on AI winners.
Asian stock markets began Friday with sharp drops because of losses for AI winners.
In Japan, a 12.5 per cent plunge for Softbank Group Corp. helped pull the Nikkei 225 index down by 4.2 per cent. The company is a major investor in OpenAI, the maker of ChatGPT, and a report in The New York Times suggested OpenAI is considering delaying an initial public offering of its stock to next year from the second half of this year.
Such an IPO would give OpenAI the chance to raise more cash to spend on data centers, as well as the opportunity for early investors like Softbank to cash out some of their holdings. But the recent stumbles for SpaceX’s stock and for AI stocks broadly may be a signal of less appetite for big AI stocks among investors.
In South Korea, SK Hynix fell 8.4 per cent, and Samsung Electronics sank 5.3 per cent. That helped pull the Kospi 5.8 per cent lower and trim its gain for the year so far to 99.6 per cent.
AP
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