NEW YORK — (AP) — U.S. stock indexes edged down from record highs on Thursday, weighed down by a drop in shares of Wall Street darling Nvidia following a mixed report on the economy.
The S&P 500 was down 0.3% from the all-time high it reached before trading was suspended for Juneteenth on Wednesday. The Nasdaq Composite Index also pulled back from its all-time high, dropping 0.8%. The Dow Jones Industrial Average rose 299 points, or 0.8%, beating market expectations.
Nvidia gave up early gains to fall 3.5%, putting an eight-week streak of gains in jeopardy. The semiconductor company has been one of the biggest beneficiaries of Wall Street’s enthusiasm for artificial intelligence technology, and on Tuesday it overtook Microsoft to become the market’s most valuable company. Nvidia’s slowdown has seen it relinquish the top spot to Microsoft.
Nvidia’s chips are powering the transition to AI, which proponents see as bringing explosive growth in productivity and profits, which are already up 164% this year after more than tripling last year.
Besides raising concerns about excessive investor excitement and a possible bubble, eye-popping profits from Nvidia and other AI winners are also helping to support the stock market despite a weak U.S. economy. High interest rates aimed at taming inflation have hurt the housing market and manufacturing, and low-income families are still showing signs of struggling to keep up with rising prices.
Winnebago Industries, for example, has been introducing “economical” trailers to attract customers amid “inconsistent retail patterns.” But the company said Thursday that its latest quarterly profit and revenue fell short of analysts’ expectations. Shares of the maker of campers and pontoons fell 3.5%.
As if to show just how powerful AI can be, Accenture, the consulting and professional services firm, saw its shares rise 7.3% despite lower-than-expected profits and revenues for the most recent quarter. In its earnings report, the company highlighted that it had booked more than $900 million in new bookings for generative AI, bringing its total to $2 billion over the past three quarters.
Overall, the S&P 500 fell 13.86 points to 5,473.17, the Dow rose 299.90 points to 39,134.76 and the Nasdaq lost 140.64 points to 17,721.59.
The supernova explosion of AI stocks is helping to mask weakness beneath the surface of the market, which may be a worrying signal for market watchers who want to see the many companies driving the market higher, not the few.
“It’s common in past cycles that when the stock market hits a key peak, the biggest growth stocks end up carrying the weight,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute.
In the bond market, a series of mixed reports on the economy sent Treasury yields higher. The number of people filing for unemployment benefits in the U.S. fell last week but not as fast as economists had expected. A separate report showed manufacturing in the Mid-Atlantic region is growing but not as quickly as economists had hoped. Meanwhile, homebuilders started fewer new homes than expected last month.
The hope on Wall Street is that U.S. economic growth will actually slow, which could help tame inflationary pressures and persuade the Federal Reserve to cut its key interest rates later this year. Such a cut would ease pressure on the economy and boost investment prices.
Fed officials have signaled they may cut their key interest rate once or twice this year, bringing it to its highest level in more than two decades, while many Wall Street traders expect two or more cuts, according to data from CME Group.
The yield on the 10-year Treasury note rose to 4.25% from 4.22% at Tuesday’s close. The yield on the two-year note, which more accurately reflects the Fed’s expectations, rose to 4.73% from 4.71%.
Some other central banks have already started to release the brakes on their economies.
The Swiss National Bank cut its key interest rate on Thursday, but the Bank of England left it unchanged.
The move helped lift stock indexes across much of Europe. France’s CAC 40 index rose 1.3%, recouping losses from last week’s shock election results. Asian indexes were mixed.
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AP writer Zimo Zhong contributed.
