The S&P 500 edged higher in a choppy Tuesday session as gains in consumer staples, materials and healthcare offset a decline in chip stocks. Micron, Intel, SanDisk and the Philadelphia SE Semiconductor Index all fell as investors awaited earnings from Wall Street’s largest companies later this week. The Federal Reserve announces its interest-rate decision on Wednesday.
The S&P 500 edged higher in a choppy session on Tuesday as gains in other sectors offset a decline in chip stocks, with investors awaiting key earnings reports from some of Wall Street’s “Magnificent Seven” companies. The tech-heavy Nasdaq traded off session lows after hitting levels last seen in late April earlier in the session.
Chip stocks slide as investors question AI spending
Global markets have become increasingly volatile this month as investors scrutinize the need for more corporate spending on AI infrastructure such as semiconductors, which underpinned strong gains in chip stocks in the previous quarter. Micron slid 8.8% and Intel shed 4.6%, while SanDisk fell 13% and Dell and Seagate lost over 10% each.
Nvidia wobbled and was last up 1%. The Philadelphia SE Semiconductor Index was down 3.5%, while Roundhill’s Memory Exchange Traded Fund fell 7.2% to an over two-month low.
Signs that Wall Street’s biggest companies such as Alphabet and Tesla are running out of cash to fund their ambitions have also made markets nervous, while China showcases cheaper AI models and deepens its presence in the competitive semiconductor industry. According to Brian Therien, a senior analyst at Edward Jones: “Investors are becoming less willing to reward higher AI spending on its own”.
Staples and healthcare carry eight higher sectors
At 12:10 p.m. ET, the Dow Jones Industrial Average rose 648.32 points, or 1.24%, to 52,858.40. The S&P 500 gained 26.61 points, or 0.36%, to 7,439.79. But the Nasdaq Composite lost 3.47 points, or 0.01%, to 24,928.61.
Eight of the sectors on the S&P 500 were higher, with consumer staples, materials and healthcare up over 2% each. Dow component Coca-Cola gained 5.5%, as the beverage company raised its annual revenue and profit forecasts. Boeing gained 4.6% after the airplane maker generated positive free cash flow as its turnaround plans gained momentum.
Investors instead favored more cash-laden tech companies. Apple rose 0.8%, sending its market capitalization briefly above $5 trillion for the first time and making it only the second company ever to achieve that milestone after Nvidia.
Fed rate decision lands on Wednesday
The Federal Reserve is due to announce its interest-rate decision on Wednesday. Traders see a 28% chance of a rate hike this week, according to LSEG data, and expect borrowing costs to rise by at least 25 basis points by year-end. Higher rates could further pressure AI companies that are becoming more dependent on debt financing.
Oil prices also offered some broader relief, falling 5.5% to $83.5 a barrel on hopes that tensions in the Middle East and in Ukraine would ease as the White House hosted Israel’s Benjamin Netanyahu and Kyiv’s Volodymyr Zelenskiy.
Source: Investing.com
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