Stan Choe
Wall Street is flirting with a record after several AI stocks reported better growth than analysts expected, while a report showed inflation across the United States was slightly less bad last month.
The S&P 500 added 0.4 per cent and was on track for its first gain since setting its all-time high on Friday. The Dow Jones Industrial Average was up 13 points, or less than 0.1 per cent, as of 2:25 p.m. Eastern time, and the Nasdaq composite was 0.7 per cent higher.
The Australian sharemarket is set to fall, with futures at 4.55am AEST pointing to a fall of 21 points or 0.2 per cent, at the open. The ASX lost 0.5 per cent on Wednesday. The Australian dollar was trading at US70.62¢.
Stocks in the artificial-intelligence technology business helped lead the way after strong profit reports bolstered hopes they can continue to deliver big-enough growth to justify the huge gains their prices have made.
Super Micro Computer, which sells servers and other equipment, jumped 19.6 per cent after reporting earnings per share for the latest quarter that were 84 per cent higher than analysts expected. It also gave forecasts for upcoming profit and revenue that topped analysts’ expectations.
CoreWeave, which offers AI computing power to customers over the cloud, leaped 19.4 per cent after reporting better revenue for the latest quarter than analysts expected, along with a milder loss. CEO Michael Intrator said demand is accelerating from customers as big businesses adopt AI.
CoreWeave gives its customers access to AI chips from Nvidia, and Nvidia climbed 3.1 per cent. It was the single strongest force lifting the S&P 500.
It’s a return to strength for AI stocks, which have been veering on a roller-coaster ride. After surging to records, AI stocks came under pressure on worries that they shot too high. Investors wanted to see big spenders on AI prove that their investments are yielding enough in profits and productivity to make them worth it. That in turn could lead to continued demand for chips and other AI infrastructure.
Wall Street also got some support from easing yields in the bond market. Treasury yields fell after a report showed that US consumers paid prices for gasoline, groceries and other costs of living last month that were 3.4 per cent higher than a year earlier.
That’s higher than anyone would like, but it’s not as bad as June’s 3.5 per cent inflation rate.
The deceleration could give the Federal Reserve more leeway to hold off on hikes to interest rates. Higher rates would help keep a lid on inflation, but it would do so by making it more expensive for U.S. households and companies to borrow and forcing a slowdown in the economy. Higher interest rates also would undercut prices for stocks and other investments.
The Fed’s members have been notably split about whether they should have already begun hiking interest rates. But Wednesday’s update on inflation pushed traders to pull back on bets the Fed will hike its main interest rate at its next meeting in September.
Traders are betting on just a 40 per cent chance of it, down from the coin flip’s chance seen the day before, according to data from CME Group.
That helped pull the yield on the 10-year Treasury down to 4.68 per cent from 4.70 per cent late Tuesday. It, though, still remains well above its 3.97 per cent level from before the war with Iran, which sent oil prices and worries about inflation spiking.
Oil prices swung between modest gains and losses Wednesday, and the price for a barrel of Brent crude slipped 0.2 per cent to $US88.74.
Higher yields have already pulled long-term mortgage rates to their highest levels in a year. That’s hurting the housing industry, and losses for homebuilders on Wednesday helped keep the market in check. D.R. Horton fell 3.1 per cent, and PulteGroup lost 2.3 per cent. Builders FirstSource, which sells countertops and other building materials, dropped 3.9 per cent.
In stock markets abroad, indexes were mixed across Europe and Asia.
South Korea’s Kospi jumped 3.7 per cent for one of the world’s bigger gains. It’s been at the center of the jarring swings for AI stocks because it’s dominated by two tech giants, Samsung Electronics and SK Hynix.
AP
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