Wall Street lower in rollercoaster session, ASX eyes gains
Stan Choe
Another selloff in high-flying artificial intelligence stocks has whipsawed Wall Street.
The S&P 500 index fell 0.9 percent after swinging between an early gain of 1 percent and a midday loss of 2.3 percent, falling further from the all-time high it set a week ago. In afternoon trading, the Nasdaq composite fell 1.7 percent and the Dow Jones Industrial Average fell 82 points, or 0.2 percent.
The Australian share market is poised to rise with futures at 4.58am (AEST) pointing to a gain of 14 points, or 0.2 per cent, at the open. The ASX fell 0.2 per cent on Tuesday after recovering from sharp selling in early trade. The Australian dollar was trading at 70.29¢.
Indexes fell as companies selling computer chips, memory and other building blocks of the artificial intelligence boom crashed from early gains to losses. Micron Technology, for example, went from a 4.2 percent jump to a 5.1 percent decline. This was one day after a 9.9 percent rise and two days after a 13.3 percent decline.
Shares of the computer memory company have tripled so far this year, fueling criticism that it’s going too far, too fast. After last week’s industry-wide sell-off, the question is whether AI stocks overall are headed for a long downturn or just need a jolt to shake off over-optimism.
Marvell Technology fell 10.7 percent and Advanced Micro Devices fell 5.9 percent after both AI winners erased early morning gains. Nvidia’s 1.6 percent decline was one of the heaviest weights on the S&P 500 because the chip company is Wall Street’s largest company by value and therefore its most influential.
Meanwhile, many famous artificial intelligence companies are racing to list their shares on the US stock exchange and sell them at high prices. OpenAI, the maker of ChatGPT, said on Monday that this was the latest example of submitting confidential documents to US regulators for an initial public offering. SpaceX’s IPO could happen later this week.
Weakness in AI stocks has overshadowed Wall Street’s benefit from the drop in oil prices. Shares in the S&P 500 rose rather than fell, despite the sharp decline in the overall index, as the barrel price of Brent crude oil fell 2.9 percent to $91.56.
Oil prices fluctuated as hopes waxed and waned that the United States and Iran could reach an agreement on reopening the Strait of Hormuz. The reopening will allow oil tankers to continue transporting crude oil from the Persian Gulf to customers around the world.
Oil prices pared losses after President Donald Trump said Iran was responsible for shooting down a US military helicopter near the Strait of Hormuz and that the US “must respond” to the attack.
High oil prices caused by the war with Iran have already caused a painful increase in inflation for US consumers. They also increased bond yields around the world, increasing pressure on stock prices.
Treasury yields fell slightly on Tuesday as oil prices fell. The yield on the 10-year Treasury note fell to 4.53 percent from 4.56 percent late Monday, but is still well above the 3.97 percent level before the war with Iran.
The latest monthly updates on US inflation will come later in the week; one on consumer prices on Wednesday and the other on wholesale prices on Thursday.
Inflation seems high enough and the U.S. job market strong enough; Traders on Wall Street largely think the Fed will have to raise its key interest rate at least once by the end of this year. Higher interest rates will limit inflation, but they also threaten to slow the economy and lower the prices of stocks and all kinds of other investments.
Average long-term U.S. mortgage interest recently rose to a nine-month high, and the high costs of borrowing could deter the construction of AI data centers that fuel the growth of the U.S. economy.
On Wall Street, JM Smucker rose 9.4 percent after reporting stronger profit than analysts expected in its latest quarter.
The company behind Folgers, Hostess and other brands has benefited from higher prices for coffee and sweet baked goods. It joins a long list of U.S. companies posting stronger profit growth than analysts expected, helping the S&P 500 hit record after record this year.
Nuvalent gained 39.1 percent after GSK agreed to buy the biotechnology company for $10.6 billion. Shares of UK-based GSK traded in New York increased by 1.4 percent.
In foreign stock markets, indices in Europe declined following the big movements in Asia.
South Korea’s Kospi rose 8.2 percent, nearly recovering from Monday’s 8.3 percent decline. We owe it to the performance of big tech stocks like SK Hynix and Samsung Electronics.
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