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Financial Markets 06/26 12:50
NEW YORK (AP) -- Most of the U.S. stock market is rising Friday after oil
prices eased back to where they were before the war with Iran, but drops for AI
stocks are keeping the market in check.
The S&P 500 rose 0.5% after recovering from an early loss of 0.9%. The index
at the heart of many 401(k) accounts is still on track for its second losing
week in the last 13, largely because of drops for stocks swept up in the mania
around artificial-intelligence technology.
The Dow Jones Industrial Average was up 194 points, or 0.4%, as of 11:45
a.m. Eastern time, and the Nasdaq composite was 0.5% higher.
Stocks got a boost as the price of Brent crude oil, the international
standard, dropped 4.5% to $72.13. That's lower than it was the day before the
United States and Israel attacked Iran, which eventually led to the closure of
the Strait of Hormuz and the curtailment of oil shipments worldwide.
The easier oil prices helped stocks of companies with big fuel bills, and
United Airlines climbed 2.1%.
Health care stocks, meanwhile, were some of the strongest forces pushing
upward on the market after a committee of the European Medicines Agency
recommended several medicines for approval and the extension for another dozen
of their therapeutic indications. That included one for Eli Lilly, whose stock
jumped 6.8%.
Besides Lilly, roughly two out of every three stocks within the S&P 500 were
rising. But more drops for AI stocks were helping to overshadow them.
After soaring to tremendous heights and leading the market for years, AI
stocks been under pressure recently because of worries their profits can't
possibly keep pace with the tremendous rallies for their stock prices. And
those drops have an outsized effect because AI stocks have grown into Wall
Street's largest and most influential, giving movements for their stock prices
more weight on indexes than others.
Micron Technology's drop of 3.3% was the heaviest weight on the market, for
example. The maker of memory for computers has been a big winner this year,
with its stock quadrupling, because the AI boom has created a surge of demand
for its products.
But investors saw the downside of that surge Thursday, when Apple said it
had to raise prices on laptops and many other of its products by significant
percentages to make up for the increases in memory prices. The worry is that
such higher prices could ultimately lead to lower demand.
Highlighting the roller-coaster ride that AI stocks have been on, SpaceX
briefly dropped below $149 in the morning, a loss of 2.9%, before pulling
higher to a gain of 2.2%.
After initially selling its stock at $135 apiece in its ballyhooed initial
public offering earlier this month, the price briefly soared above $225 within
its first few days of trading. Besides rockets, Elon Musk's company also owns
the xAI artificial-intelligence business.
The day's largest loss in the S&P 500 was a 21.6% drop for Onsemi, which
said it agreed to buy Synaptics in an all-stock deal valued at roughly $7
billion.
In the bond market, Treasury yields eased with oil prices. The yield on the
10-year Treasury fell to 4.37% from 4.40% late Thursday.
It got some help from a report showing that expectations for inflation in
the coming year inched down among U.S. consumers to 4.6% from 4.8% in May.
That's still high, but moves downward mean less chance of a vicious cycle where
expectations for higher inflation drive changes in behavior that create higher
inflation.
High yields in bond markets worldwide caused by worries about inflation have
been threatening to slow economies, and they have already sent rates higher for
mortgages and other kinds of loans. High yields also hurt prices for
investments, particularly those seen as the most expensive. That raises the
pressure on AI winners.
Asian stock markets began Friday with sharp drops because of losses for AI
winners.
In Japan, a 12.5% plunge for Softbank Group Corp helped pull the Nikkei 225
down by 4.2%. The company is a major investor in OpenAI, the maker of AI
chatbot ChatGPT, and a report in The New York Times suggested OpenAI is
considering delaying an initial public offering of its stock to next year from
the second half of this year.
Such an IPO would give OpenAI the chance to raise more cash to spend on data
centers, as well as the opportunity for early investors like Softbank to cash
out some of their holdings. But the recent stumbles for SpaceX's stock and for
AI stocks broadly may be a signal of less appetite for big AI stocks among
investors.
In South Korea, SK Hynix fell 8.4%, and Samsung Electronics sank 5.3%. That
helped pull the Kospi 5.8% lower and trim its gain for the year so far to 99.6%.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
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