The U.S. stock market is showing signs of recovery, with notable gains in artificial intelligence (AI) companies, following a turbulent week. As of Thursday morning, the S&P 500 increased by 0.5%, recovering from a previous two-day decline that brought it back to early May levels. The Dow Jones Industrial Average gained 326 points, or 0.7%, while the Nasdaq composite also rose by 0.7%.
AI stocks have been a driving force behind this rebound, illustrating the volatility of the sector. Recently, these stocks have experienced extreme fluctuations as investors grapple with the rapid rise and fall of valuations amidst growing concerns over whether they have surged too quickly. Marvell Technology, for instance, surged by 5.5% after experiencing a series of sharp price swings, including a staggering 32.5% one-day jump attributed to a comment by Nvidia’s CEO suggesting Marvell could become “the next trillion-dollar company.”
The chipmaking sector performed particularly well, with Intel climbing 7.8% and Applied Materials increasing by 7.5%. However, not all tech companies enjoyed the rally. Oracle stock plummeted by 11.1%, despite reporting stronger-than-expected profits. The company announced plans to raise $40 billion in cash via borrowing and stock sales for AI investments, indicating that big spending in the AI sector could be a double-edged sword.
Oil prices remained relatively stable but were influenced by rising tensions in the ongoing conflict with Iran, which has raised concerns about oil delivery disruptions. With recent attacks between the U.S. and Iran, the backdrop of escalating tension persists, yet current military actions have been described as limited compared to previous engagements. Brent crude oil prices dipped by 0.5% to $92.64 per barrel, while U.S. benchmark crude saw a slight increase of 0.3%, trading at $90.29 per barrel.
Inflation remains a pressing issue, particularly as high oil prices contribute to rising costs across the board. A new report showed that wholesale prices in the U.S. increased more than anticipated in May, which prompted the European Central Bank to become the first major institution to raise interest rates in response to inflationary pressures. Higher interest rates can help control inflation but may also dampen economic growth and negatively impact investments, especially in the tech sector where valuations have skyrocketed. Critics have begun to liken the current AI investment climate to a potential bubble.
The Federal Reserve, under new chair Kevin Warsh, is expected to make key decisions on interest rates in the near future, with widespread anticipation of maintaining current rates. However, traders are starting to lean towards the possibility of at least one rate hike by the end of the year. The 10-year Treasury yield slightly decreased to 4.52% from 4.55% late Wednesday.
Globally, stock markets experienced modest gains, with European indexes showing upward trends following a mixed finish in Asian markets. London’s FTSE 100 rose by 0.9%, while Hong Kong’s Hang Seng index fell by 0.7%, reflecting ongoing global market fluctuations.
