Stan Choe
Updated ,first published
Drops for computer chipmakers and other winners of the artificial-intelligence boom dragged down stock markets worldwide on Thursday.
The S&P 500 fell 0.5 per cent, even though more stocks rose within the index than fell. The Dow Jones Industrial Average dipped 105 points, or 0.2 per cent, and the Nasdaq composite sank 1.5 per cent.
The Australian sharemarket is set to slide, with futures pointing to a fall of 14 points, or 0.2 per cent, at the open. The ASX closed flat on Thursday. The Australian dollar was trading at US69.94¢ at 5.13am AEST.
Nearly three out of every four stocks rose within the S&P 500 after more of the country’s biggest companies reported better earnings for the latest quarter than analysts expected.
Abbott jumped 10.7 per cent after the healthcare company delivered a fatter profit than expected and raised its forecast for earnings over the full year. J.B. Hunt Transport Services climbed 8 per cent after the freight company likewise topped analysts’ expectations for the latest quarter.
But a 1 per cent move for Nvidia’s stock packs more punch on the S&P 500 than a 1 per cent move for any other company because it’s the largest on Wall Street by value.
And Nvidia fell 2.4 per cent, making it the heaviest weight on the index. Other AI winners also sank, giving back some of their stellar gains.
Micron Technology fell 5.6 per cent to shave its gain for the year so far below 199 per cent. Sandisk fell 12.6 per cent but is nevertheless up 494 per cent for the year so far. Western Digital sank 9.2 per cent but is still up 171 per cent for the year so far.
Such stocks have been under pressure for weeks because of worries that their prices shot too high and that voracious demand for computer memory and processors may not be sustainable if AI ends up not producing as much profit and productivity as promised.
All told, the S&P 500 fell 38.63 points to 7,533.77. The Dow Jones Industrial Average dropped 105.67 to 52,552.97, and the Nasdaq composite sank 387.28 to 25,881.95.
The losses came even though Taiwan Semiconductor Manufacturing Co., a bellwether of the chip industry, reported a stronger profit for the latest quarter than analysts expected. Its stock in Taiwan rose 1.2 per cent, but its stock that trades in the United States fell 2.3 per cent.
In South Korea, drops for AI winners like Samsung Electronics and SK Hynix dragged the Kospi index down 6.4 per cent. It’s been among the world’s shakiest markets in recent weeks because of how dominant the two AI winners are in it.
The day before, the Kospi jumped 6.2 per cent, but it’s had drops of 8.9 per cent, 7.8 per cent and 5.3 per cent in the last couple of weeks.
A hike to interest rates by the Bank of Korea also weighed on stocks in Seoul, the first by the bank since 2023.
Higher interest rates can keep a lid on inflation, but they also slow the economy and hurt prices for all kinds of investments. And worries are rising that the Federal Reserve and other central banks around the world may have to raise rates to rein in the effects of expensive oil.
Oil prices are near their highest in a month because of worries that the war with Iran will keep oil tankers out of the Strait of Hormuz and prevent shipments of crude from the Persian Gulf to customers worldwide.
The price for a barrel of Brent crude briefly climbed above $US86 per barrel in the morning before erasing the gain and falling back to settle at $US84.23, down 0.8 per cent from the day before.
In the bond market, the 10-year Treasury yield edged up to 4.56 per cent from 4.55 per cent late Wednesday and just 3.97 per cent before the war with Iran began. Higher yields have already sent the average 30-year mortgage rate to its highest level in nearly a year.
Reports on the US economy came in mixed, which added to the eddies swirling through the bond market. One report said shoppers spent less at US retailers last month than economists expected. But after ignoring sales at gasoline stations, spending by US consumers remained resilient.
A separate report said fewer US workers applied for unemployment benefits last week, an indication of a solid job market, while a third report said manufacturing in the mid-Atlantic region is better than economists expected.
In stock markets abroad, indexes fell across much of Europe and Asia, including drops of 1.8 per cent in Shanghai and 2.8 per cent in Tokyo.
Hong Kong’s Hang Seng was an outlier and rose 1.3 per cent. Alibaba rose after China’s cyberspace regulator said Wednesday it had approved the Apple Intelligence AI tool for use in China. An Alibaba spokesperson said its Qwen model will be integrated into Apple Intelligence.
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