Stocks wavered to a mixed close on Wall Street on Wednesday as technology stocks once again weighed down the market.
Declines for several influential tech heavyweights, including Microsoft, pulled the broader market lower, even though most stocks in the S&P 500 gained ground. That was also the case on Tuesday when tech stocks pulled the market lower, despite broader gains elsewhere.
The S&P 500 fell 7.24 points, or 0.1 per cent, to 7,358.22, despite nearly 2 out of every 3 stocks gaining ground. The Dow Jones Industrial Average, which is less weighted with tech stocks, rose 182.06 points, or 0.4 per cent, to 51,848.90.
The tech-heavy Nasdaq composite fell 110.40 points, or 0.4 per cent, to 25,476.64.
A 2.3 per cent drop in Microsoft was the heaviest weight on the market. Oracle slumped 4.6 per cent.
Many large tech companies have been behind Wall Street’s record-setting run throughout the year, but analysts have warned their valuations may have become stretched.
“The next phase of the AI investment cycle is beginning to collide with market discipline,” said Jason Vaillancourt, chief portfolio strategist at Columbia Threadneedle, in a research note.
Google’s parent company Alphabet slipped 0.2 per cent. The company is replacing Verizon in the Dow on Monday. The company’s inclusion in the S&P 500 means more to investors, however, because 401(k) accounts are much more likely to include an S&P 500 index fund than anything tied to the Dow.
Alphabet will become the fifth Magnificent 7 company to join the Dow. The others are Apple, Amazon, Microsoft and Nvidia.
Oil prices continued slipping as the US and Iran negotiate a possible end to their war. Brent crude, the international standard, fell 3.8 per cent to US$73.87 a barrel. It has been trading below US$80 in recent days but is still above the roughly US$70 per barrel it was trading at in late February before the war began. US crude prices fell 3.9 per cent to US$70.34 a barrel.
Oil companies had some of the biggest losses. Exxon Mobil fell 2.0 per cent and Chevron lost 2.6 per cent.
Some of the bigger winners on Wall Street included homebuilders following approval of legislation beneficial to the industry. KB Home surged 16.7 per cent and D.R. Horton jumped 6.7 per cent.
Treasury yields mostly fell, removing some pressure from stocks. The yield on the 10-year Treasury fell to 4.40 per cent from 4.50 per cent late Tuesday. The yield on the 2-year Treasury eased to 4.15 per cent from 4.16 per cent.
Treasury yields are still elevated from earlier in the year, especially the 2-year Treasury, which more closely tracks anticipated action from the Federal Reserve. The central bank has signalled that it is considering raising its benchmark interest rate by the end of the year. Wall Street is forecasting at least one hike to interest rates by December, according to data from CME Group.
The Fed is worried about stubborn inflation, which had been rising throughout the year as tariffs raised the costs for a wide range of goods. A shock to energy prices because of the US war with Iran worsened inflation. Gasoline prices surged and shipping costs rose. The impact is expected to linger even as oil and gasoline prices fall.
The central bank will get an update on inflation Thursday, when its preferred measure for prices is released. Economists expect the Personal Consumption Expenditures price index, or PCE, to show that prices rose 4.1 per cent in May. That would be the highest level in three years.
“Thursday’s PCE is set to take on greater importance for markets, especially since Federal Reserve Chair (Kevin) Warsh was emphatic in last week’s meeting about the central bank’s desire to achieve price stability,” wrote Rick Gardner, chief investment officer at RGA Investments, in a research note.
Gold prices fell 3.4 per cent to settle at US$4,008.80 an ounce. Earlier in the day, gold briefly traded below US$4,000, and hasn’t settled below that level since November. Gold was above US$5,000 an ounce earlier in the year. The precious metal is often seen as a barometer of the appetite for risk among investors, with more buying at times of increased anxiety and more selling as anxiety eases.
Markets were mixed in Europe.
-AP
