Wall Street Mixed Amid Economic Data and AI Enthusiasm

Most U.S. stocks declined on Thursday following mixed economic data, including a positive inflation report. However, hopes for potential interest rate cuts and the ongoing excitement around artificial intelligence kept indexes near their record highs.

By mid-morning, the S&P 500 had dipped 0.1% after hitting an all-time high the previous day. The Dow Jones Industrial Average dropped 257 points, or 0.7%, while the Nasdaq composite rose 0.3% to a new record.

Treasury yields decreased, reflecting growing confidence that inflation is slowing enough for the Federal Reserve to consider cutting interest rates later this year. A recent report indicated that wholesale inflation was lower than expected, with prices paid by wholesalers falling from April to May, contrary to economists’ forecasts.

This followed a promising consumer inflation report on Wednesday, which Federal Reserve Chair Jerome Powell described as encouraging. He noted that more such data is needed before the Fed could lower its main interest rate, which is currently at its highest level in two decades.

High interest rates have negatively impacted some sectors of the economy, particularly manufacturing. Another report on Thursday revealed that more U.S. workers filed for unemployment last week than anticipated, though the number remains low historically.

Wall Street hopes for a gradual slowdown in job market and economic growth to ease inflation without triggering a deep recession. However, companies closely tied to the economy’s strength lagged behind on Thursday.

Dave & Buster’s Entertainment dropped 12.2% after reporting larger-than-expected declines in profit and revenue, citing a “complex macroeconomic environment.” Other companies have also noted that lower-income households are struggling with persistent inflation.

Conversely, some companies have thrived despite economic pressures, fueled by the artificial intelligence boom. Broadcom’s stock surged 13.3% after the semiconductor company reported stronger-than-expected quarterly profits, driven by AI demand. The company also raised its revenue forecast for the year.

Broadcom’s stock price has climbed to approximately $1,700, prompting a plan to issue nine shares for every existing one to make the price more accessible. This follows a similar strategy by Nvidia, a leading AI company whose market value has surpassed $3 trillion.

Tesla saw a 2.9% increase in its stock after CEO Elon Musk announced that early voting results indicate shareholders will likely approve his pay package. Musk had hinted at moving AI research to another of his companies if the package was not approved.

In the bond market, the yield on the 10-year Treasury fell to 4.28% from 4.32% the previous day and from 4.60% last month. The two-year yield, which is more sensitive to Federal Reserve expectations, decreased to 4.71% from 4.76%.

Fed officials are considering one or two interest rate cuts this year, with traders hopeful they could start as early as September. Such cuts would relieve economic pressure and boost investment prices.

Internationally, European stock indexes fell as G7 leaders met in Italy. Europe is still feeling the impact of a European Parliament election that saw a rise in far-right support in countries like France and Germany. France’s CAC 40 dropped 1.9%, and Germany’s DAX declined 1.7%.

In Asia, Japan’s Nikkei 225 slipped 0.4% ahead of an interest rate decision by Japan’s central bank. However, indexes in Seoul and Hong Kong rose.