U.S. Stock Markets Close Mixed as AI Stocks Rebound After Volatile Day
NEW YORK (AP) — U.S. stock markets closed mixed on Wednesday, marking a rebound from steep morning declines, as Artificial Intelligence (AI) powerhouses like Nvidia and Palantir Technologies significantly pared their early losses. The volatile trading day underscored ongoing investor speculation surrounding AI profitability and broader economic signals.
The benchmark S&P 500 index dipped by just 0.2%, or 15.59 points, to settle at 6,395.78, recovering substantially from an earlier 1.1% deficit. Despite the day’s fluctuations, the index remains remarkably close to the all-time high it achieved last week. The Dow Jones Industrial Average, in contrast, eked out a modest gain, adding 16.04 points, or less than 0.1%, to reach 44,938.31. The tech-heavy Nasdaq composite, however, ended the day down 0.7%, losing 142.10 points, to close at 21,172.86.
AI Stocks Under Scrutiny
Artificial Intelligence stocks once again dominated market attention. Nvidia, the chipmaker whose technology is crucial to the burgeoning AI sector and currently Wall Street’s most valuable stock, initially plunged as much as 3.9% on Wednesday, following a 3.5% slide on Tuesday. However, the company dramatically recovered, closing down by a mere 0.1%. This recovery proved pivotal for the broader market indexes, given Nvidia’s significant influence. Similarly, Palantir Technologies, another prominent AI beneficiary, recovered from an early 9.8% drop to end the day down 1.1%, adding to its 9.4% loss from the previous day.
The initial sell-off in AI-related stocks was partly attributed to a new study from MIT’s Nanda Initiative. Ulrike Hoffmann-Burchardi, global head of equities at UBS Global Wealth Management, highlighted the study’s warning that most corporations are yet to realize measurable returns from their generative AI investments. Beyond this, a prevailing market sentiment suggests that the prices of these high-flying AI stocks, which saw Nvidia soar 35.5% and Palantir more than double year-to-date heading into Tuesday, had simply risen too far, too fast, becoming overly expensive. Despite these concerns, a segment of investors remains steadfast, believing AI will usher in the next generational business revolution.
Mixed Fortunes in Retail
Elsewhere, a mixed bag of profit reports from major U.S. retailers kept other market sectors in check. TJX Companies, the parent company of popular off-price retailers like TJ Maxx and Marshalls, saw its shares climb 2.7%. The company surpassed analysts’ profit and revenue forecasts and raised its full fiscal year profit outlook. CEO Ernie Herrman noted “strong demand” across all U.S. and international businesses, signaling a robust start to the current quarter. Home improvement giant Lowe’s also saw a slight gain of 0.3% after reporting quarterly profits that exceeded expectations.
Conversely, Target shares tumbled 6.3% following the announcement that CEO Brian Cornell plans to step down on February 1, to be succeeded by 20-year company veteran Michael Fiddelke. While Cornell is credited with revitalizing the retailer, Target has struggled to boost sales in a fiercely competitive post-COVID retail environment. Estee Lauder also faced headwinds, dropping 3.7% after its upcoming fiscal year profit forecast fell short of Wall Street estimates, with the beauty company projecting tariffs to reduce earnings by approximately $100 million. Furniture maker La-Z-Boy rounded out the disappointments, sinking 12.1% as its spring profit and revenue missed analyst predictions.
Anticipation Builds for Powell’s Speech
The financial world now keenly awaits Federal Reserve Chair Jerome Powell’s highly anticipated speech on Friday in Jackson Hole, Wyoming. Investors are hoping Powell will signal imminent interest rate cuts, a move that could invigorate economic activity. The Fed has maintained its main interest rate steady this year, primarily due to concerns that potential tariffs proposed by former President Donald Trump could fuel inflation. However, a recent surprisingly weak report on U.S. job growth may shift the central bank’s focus, potentially superseding inflation worries. Reflecting these expectations, the yield on the 10-year Treasury fell slightly to 4.29% from 4.30% late Tuesday.
Former President Trump has been an outspoken critic of the Federal Reserve’s rate policy, frequently calling for lower interest rates and personally criticizing Powell. On Wednesday, Trump escalated his pressure by demanding the resignation of Federal Reserve official Lisa Cook, following an accusation of mortgage fraud made by a member of his administration.
Global Market Overview
Internationally, stock markets presented a mixed picture across Europe and Asia. London’s FTSE 100 index rose 1.1%, defying a report indicating that inflation in the United Kingdom climbed more than expected through July, driven partly by soaring airfares and food prices. Hong Kong’s Hang Seng index edged up 0.2%. A standout performer in Hong Kong was Chinese toy company Pop Mart International Group, whose shares soared 12.5% after its CEO projected annual revenue to exceed $4 billion this year and announced a new mini version of its popular Labubu dolls, captivating investors with prospects of continued growth.
