NEW YORK (AP) — U.S. stock indexes remained mixed on Monday despite gains in most stocks as shares of Wall Street giant Nvidia fell again.
The S&P 500 fell 0.3%, down from a record high hit last week. The Nasdaq Composite Index slid 1.1%, while the Dow Jones Industrial Average rose 260 points, or 0.7%, on losses in stocks such as Nvidia, a winner of Wall Street’s artificial intelligence boom.
Oil and gas company shares were the market’s strongest performers, with seven of 10 stocks in the S&P 500 rising. Exxon Mobil rose 3% and oilfield services provider SLB added 4% as crude oil prices hovered near their highest levels since April.
Financial stocks also fared well, with JPMorgan Chase rising 1.3% and Wells Fargo adding 1.6% ahead of the results later this week of the Federal Reserve’s test of how big banks would fare in a downturn.
But declines in several notable stocks offset all those gains, most notably Nvidia’s 6.7% plunge, which marked the third consecutive drop for the semiconductor company that had soared 1,000% since the fall of 2022.
Insatiable demand for Nvidia chips to power artificial intelligence (AI) applications is a key reason why the U.S. stock market has recently surged to record highs, even as rising interest rates slow economic growth. But the AI frenzy has also raised concerns about a possible stock market bubble and inflated investor expectations.
Nvidia’s shares have been on a downward trend since briefly overtaking Microsoft last week to become Wall Street’s most valuable company, dropping nearly 13% in just three days. Nvidia’s larger size gives the company’s stock price more of an impact on the S&P 500 and other indexes, with the company’s shares having the biggest impact yet on the S&P 500 index on Monday.
Other AI beneficiaries also gave up some of their big gains. Supermicro Computer fell 8.6%, taking its gains so far this year to just 190.9%, down below 200%.
This shuffling could actually be a healthy sign for the market, as long as it can stay near its all-time highs. Market watchers have been concerned that Nvidia and a few other companies have been responsible for much of the S&P 500’s recent gains. They want to see a market with more stocks joining the rally.
RXO rose 23% after it agreed to buy Coyote Logistics’ freight brokerage business from UPS for nearly $1.03 billion. RXO said the deal would make it the third-largest brokered carrier in North America. UPS, which bought Coyote in 2015 for $1.8 billion, rose 1.5%.
Under Armour Inc. swung from an initial loss to a 2% profit after it said it agreed to pay $434 million to settle lawsuits brought by shareholders related to its accounting and sales practices. The shoe and sportswear maker denied any wrongdoing in the settlement, but also agreed to separate the roles of chairman and CEO for at least three years.
In the end, the S&P 500 fell 16.75 points to 5,447.87, the Dow rose 260.88 points to 38,411.21 and the Nasdaq Composite lost 192.54 points to 17,496.82.
In the bond market, government bond yields edged lower. The yield on the 10-year Treasury note fell to 4.23% from Friday’s close of 4.26%.
Yields have mostly retreated since rising above 4.70% in late April, easing pressure on the stock market. Yields have been sliding on expectations that inflation is slowing and that the Federal Reserve will cut its key interest rate later this year.
The Fed wants to squeeze the economy enough to keep inflation under control, and has kept the federal funds rate at its highest level in more than two decades.
UBS economists led by Abigail Watt say Fed officials may be underestimating how much the U.S. economy is slowing. They see growth slowing to an annualized rate of less than 2% in the first half of 2024 from a 3.1% year-over-year expansion in the fourth quarter of 2023.
UBS economists say the bottom 40% of U.S. households are burning through savings they built during the pandemic and dipping into them, which could further slow fluctuating retail sales as companies highlight how lower-income customers are often struggling to keep up.
Wall Street is indeed hoping for a slowdown in the economy, which would reduce upward pressure on inflation and pressure the Federal Reserve to cut interest rates. Goldman Sachs economist David Mericle said a cut could come as soon as September if inflation reports like the one due on Friday turn out as expected.
The Fed needs to cut rates at the right time: wait too long and the economic slowdown risks turning into a recession, cut too soon and inflation risks reviving.
Overseas stock markets saw stock indexes rise across much of Europe after mainly falling in Asia.
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AP writers Matt Ott and Jimmo Zhong contributed.
