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Financial Markets 06/10 09:33
NEW YORK (AP) -- Technology stocks are continuing to fall on Wednesday, and
the S&P 500 index is on track for its first back-to-back drop in three weeks.
The main measure of Wall Street's health slipped 0.6%. The Dow Jones
Industrial Average was down 314 points, or 0.6%, as of 9:35 a.m. Eastern time,
and the Nasdaq composite was 0.8% lower.
More drops for stocks swept up in the artificial-intelligence boom dragged
indexes lower. After roaring to records and pulling the market up with them, AI
stocks took a sudden turn lower last week. Among the worries is that their
prices have simply shot too high, too fast.
Super Micro Computer, which sells AI servers, tumbled 13.5% after saying it
plans to raise $7 billion in cash by selling shares of stock and convertible
preferred stock. Such moves raise the most money for companies when their stock
prices are high, and they can dilute the ownership stakes of existing
shareholders.
Micron Technology fell 2.8%, chipping more away from its tremendous gain for
the year so far. A week ago, the computer memory maker's stock was up nearly
280%. Now, its year-to-date gain is down to 218.2%.
U.S. tech stocks had appeared to be heading for even sharper losses early
Wednesday, based on futures contracts, but an update on U.S. inflation that
arrived an hour before trading began helped pare the losses.
The report said inflation accelerated to its highest level in three years,
but that was exactly what economists had forecast. An important underlying
measure of inflation, meanwhile, slowed by slightly more in May from April than
economists expected.
That helped Treasury yields ease a bit in the bond market, which in turn
relaxed some of the pressure that's built up on the stock market.
High bond yields can slow entire economies and undercut prices for all kinds
of investments, including stocks and cryptocurrencies. They particularly hit
investments seen as the most expensive, and some critics are calling AI a
bubble where investment inflated too far.
The yield on the 10-year Treasury edged down to 4.52% from 4.53% just before
the inflation report's release. The two-year Treasury yield, which more closely
tracks expectations for what the Federal Reserve will do with its overnight
interest rates, eased to 4.11% from 4.13% just before the report.
Traders have been building bets recently that the Fed will have to hike its
main interest rate at least once this year, given how high inflation is and how
strong the U.S. job market remains. Wednesday's inflation update caused them to
trim their bets, but only by a smidgen, according to data from CME Group.
Keeping things uncertain are continued swings for crude oil prices, which
have been rising and falling with hopes that the United States and Iran can
reach a deal to reopen the Strait of Hormuz to oil tankers.
The price for a barrel of Brent crude oil rose 1.1% to $92.43 after
President Donald Trump warned Iran would "pay the price" for stalled
negotiations between the two on their war.
In stock markets abroad, indexes in Europe pared their losses following the
update on U.S. inflation. In Asia, the losses were sharper.
South Korea's Kospi dropped 4.5%, hurt by losses for tech giants Samsung
Electronics and SK Hynix.
Tokyo's Nikkei 225 sank 1.9% after data showed Japan's producer price index,
a measure for prices at the wholesale level, rose in May at the fastest pace in
more than three years. Shares of technology and telecommunications giant
SoftBank Group, which has a strong AI focus, lost 8.3%.
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AP Business Writers Chan Ho-him and Matt Ott contributed to this report.
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