FILE – A view of the New York Stock Exchange, June 12, 2024. European stocks fell and Asian shares ended mixed on Thursday, June 13, 2024, as the Federal Reserve opted to keep interest rates unchanged. (AP Photo/Peter Morgan)
NEW YORK (AP) — U.S. stocks were mostly lower on Thursday, but indexes rallied to record highs on hopes of upcoming interest rate cuts and continued enthusiasm on Wall Street over artificial intelligence technology.
The S&P 500 was up 0.2% from the all-time high it set the previous day despite declines in most of its components. The Nasdaq Composite Index was up 0.3% from its all-time high, driven by gains in technology stocks, while the Dow Jones Industrial Average was down 65 points, or 0.2%.
In the bond market, Treasury yields fell again on growing confidence that inflation has slowed enough for the Federal Reserve to cut interest rates later this year.
The latest inflation report shows that prices paid at wholesale prices weren’t as bad as economists expected: Prices actually fell from April to May when economists expected them to rise.
That follows a surprising update on Wednesday that showed consumer-level inflation was weaker than expected. Federal Reserve Chairman Jerome Powell called the report encouraging and said policymakers needed more of that data before cutting their key interest rate from its tightest level in two decades.
“It’s not a question of if they will cut rates, but when,” said Niladri “Neil” Mukherjee, chief investment officer at TIAA Wealth Management.
High interest rates are dragging down parts of the economy, particularly manufacturing. A separate report released Thursday showed that more U.S. workers filed for unemployment benefits last week than economists expected, but the number is still low by historical standards.
Wall Street is hoping that job market and economic growth will continue to slow to ease inflationary pressures, but not slow enough to trigger a deep recession.
Companies whose profits are most closely tied to the strength of the economy, such as oil and gas producers and industrial companies, performed worse than the market on Thursday following the reports.
Dave & Buster’s Entertainment Inc. reported a bigger drop in profits and revenues than analysts expected in its latest quarter, dropping 10.9%, citing a “complex macroeconomic environment” as the reason. Other companies have detailed in recent days that they are seeing divisions among customers, with lower-income families still struggling to keep up with high inflation.
Thanks to the ongoing excitement around artificial intelligence technology, some companies are experiencing rapid growth despite economic pressures.
Semiconductor company Broadcom Inc.’s shares rose 12.3% after the company reported profits for its latest quarter that beat analysts’ expectations, again buoyed by demand for AI. The company also raised its revenue forecast for the year.
With Broadcom’s shares soaring to nearly $1,700, the company plans to give investors nine shares for every one they already own in an effort to lower the price and make it more affordable. The move follows a similar one from Nvidia, which has become the poster child for the AI rush and is valued at more than $3 trillion.
Tesla shares rose 2.9% after Chief Executive Elon Musk said early voting results showed shareholders were leaning toward approving his compensation package, after he had threatened to move his AI research to another company.
Overall, the S&P 500 rose 12.71 points to 5,433.74, the Dow lost 65.11 points to 38,647.10 and the Nasdaq added 59.12 points to 17,667.56.
In the bond market, the yield on the 10-year Treasury note fell to 4.24% from 4.32% at Wednesday’s close and to 4.64% from 4.60% late last month. The yield on the two-year note, which is heavily influenced by Fed expectations, fell to 4.69% from 4.76%.
Most Fed officials are planning to cut interest rates once or twice this year, and traders are hoping the first cuts will come as soon as September, which would ease pressure on the economy and boost the prices of all investments.
TIAA’s Mukherjee said he expects U.S. economic growth to continue to slow as lower-income households weaken spending due to declining savings balances. But he expects a recession will be averted as spending by wealthier households, governments and businesses continues to benefit from expanding investment portfolios and rising home prices.
“To me, we have already achieved a soft landing for the economy, where inflation eases without a deep recession,” he said.
But he is cautious about stock prices’ expectations for the rest of the year, as they have already risen significantly — the S&P 500 is up nearly 14% — and he also points to the possibility of financial market volatility surrounding upcoming elections, including the U.S. presidential election.
“We are preparing for more election surprises,” Mukherjee said. “I don’t know which ones, but the world seems full of surprises these days.”
European markets have been shaken by recent elections in countries including France and Germany that unexpectedly boosted support for the far-right. Other countries, including Mexico and India, have also seen volatility in recent days as investors learned the results of their elections.
European stocks fell sharply on Thursday as leaders of the Group of Seven nations met in Italy, with France’s CAC 40 index falling 2% and Germany’s DAX index also down 2%.
In Asia, Japan’s Nikkei stock average fell 0.4 percent ahead of an interest rate decision by the Bank of Japan due on Friday. Stock indexes rose in Seoul and Hong Kong.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
