Tech stocks weigh on Wall Street, ASX set to rise
Stan Choe
Most US stocks are on the rise after the latest update on the job market suggested the Fed may feel less pressure to raise interest rates. But volatility in chip stocks and other winners of the AI boom is keeping the indexes mixed.
The S&P 500 fell 0.4 percent, even though two out of every three stocks in the index were up. The Dow Jones gained 297 points, or 0.6 percent, and the Nasdaq composite fell 1.1 percent after erasing an early gain. The Australian share market was set to rise 29 points, or 0.3 per cent, at the open. The ASX was trading flat on Thursday. The Australian dollar was stronger at 69.18¢.
Stocks were broadly helped by easing in the bond market, which fell after a U.S. government report said employers added 57,000 jobs to payrolls last month. That growth is a good thing for the economy, but it also fell short of the 100,000 jobs economists expected and was a slowdown from the hiring pace in May.
The weaker-than-expected result could keep pressure on inflation, which has accelerated around the world due to a rise in oil prices due to the war with Iran. And if inflation slows in the coming months, the Federal Reserve may feel less of a need to raise interest rates several times this year as oil prices fall below pre-war levels.
This could be a relief for investors who prefer low interest rates because they could provide a boost to the economy by making it cheaper for U.S. households and businesses to borrow and spend. Low rates also tend to push up stock and other investment prices.
The yield on the 10-year Treasury bond rose from 3.97 percent before the war to 4.50 percent in the morning hours. However, after the release of US hiring data, this rate decreased to 4.49 percent.
The two-year Treasury yield, which more closely tracks expectations for the Fed, fell more sharply. Investors now see an 82 percent chance that the Fed and its new chairman, Kevin Warsh, will not raise the federal funds rate at their next meeting later this month. This is up from the 71 percent chance seen a day earlier, according to data from CME Group.
“The labor market is not overheating,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management. He said the data could allow the Fed to wait through the summer to get more clues about how inflation is behaving before deciding to raise rates.
On Wall Street, the company behind LaCroix sparkling water helped lead the market, gaining 13.4 percent after National Beverage said it would pay a special dividend of $3.25 for every share investors hold.
Dollar Tree rose 1.9 percent after the retailer said it had approved a program to send up to $2.5 billion to shareholders by buying back its shares.
Shares of companies in the crypto industry were also strong after the Bitcoin price rose nearly 2.6 percent, a day after approaching its lowest level since 2024. Robinhood Markets gained 3.2 percent and Coinbase Global gained 3.6 percent.
But further declines for computer chip companies weighed on the indexes. They have come under pressure as stock prices have soared too high due to the AI craze and concerns that all the spending on chips and data centers may not produce as much profit and productivity growth as hoped.
Memory maker Micron Technology fell 7 percent, erasing early gains a day after a 10.6 percent drop. Nvidia fell 2.4 percent and Applied Materials fell 10 percent. They’ve become among the S&P 500’s heaviest weights because they’ve grown so much in size amid the AI craze.
The continued decline of chip companies on stock markets abroad has caused indices to fall sharply in many Asian markets. South Korea’s Kospi index fell 7.9 percent due to losses from chip companies such as SK Hynix. That’s its worst decline since a 10 percent drop just over a week ago.
The indexes also fell 2.5 percent in Tokyo and 2 percent in Shanghai.
European indices strengthened and France’s CAC 40 index gained 1.7 percent.
In the oil market, prices continued to ease on hopes that negotiations to permanently end the war with Iran would continue. Brent crude oil, the international standard, fell 0.1 percent to $71.49 per barrel.
