Investing.com — Wall Street on Thursday ended mixed in volatile trading, as the tech sector whipsawed on conflicting indicators from and iPhone-giant . Meanwhile, the dollar and U.S. Treasury yields slipped after a key inflation reading came in-line with expectations.
The S&P 500 shed 0.1% to close at 7,354.42 points, having swung from as high as 0.8% to as low as 0.5%. The tech-heavy slipped 0.5% to settle at 25,358.60 points, having seesawed from an advance of as much as 1% to a slide of as much as 1.4%.
The blue-chip bucked the trend, eking out a gain of 0.1% to conclude at 51,920.93 points, after earlier scaling a new intraday record high.
“This morning brought the push/pull nature of pricing to the fore. Stock traders were initially enthusiastic after another round of solid earnings and guidance from Micron Technology (MU) after yesterday’s close but were then taken aback by Apple’s (AAPL) announcement of price increases. These two stories are inextricably related and have led to a session that has caused major indexes to search for direction,” Steve Sosnick, chief strategist at Interactive Brokers, said.
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Micron, surge on strong AI-fueled guidance, Apple slips
Micron Technology surged and ended nearly 16% higher after the memory chipmaker delivered blowout quarterly earnings and issued guidance that topped even the most bullish forecasts. The results offered a reprieve for investors rattled by this week’s sharp selloff in growth stocks, where stretched AI-driven valuations had collided with fears over higher borrowing costs under a new Federal Reserve chair.
Micron, long viewed as a bellwether for the semiconductor industry, pointed to robust demand from artificial intelligence workloads and hyperscale data centers.
“The big takeaway from Micron wasn’t really the FQ3 numbers and FQ4 guidance but instead the incremental color on the company’s ’SCAs’ (strategic customer agreements), which mgmt. spent a lot of time highlighting as a way to signal to investors that the current boom is more than just an ephemeral phenomenon,” Vital Knowledge’s Adam Crisafulli said.
He added that the more durable Micron’s earnings are perceived to be, the more its P/E multiple is likely to expand. That appetite is expected to keep memory supplies tight and prices elevated, raising hopes that the sector’s massive capital expenditures will translate into tangible returns rather than just ballooning debt loads.
The upbeat outlook helped soothe nerves in a market that had fretted over whether investors would continue to underwrite the AI boom through debt issuance at a time when rising rates dim the shine of growth names.
The relief rippled across Asia, where shares of Micron’s South Korean rivals and rebounded sharply in Thursday trade after being at the epicenter of the rout earlier this week.
Crisafulli later noted that Micron’s results were not “positive” for the “whole tech ecosystem.”
“The company’s 81% (operating) margin is (probably) especially galling to the rest of the industry clamoring for memory. If one wants (the) AI party to continue, it can’t be the case that >100% of profit/cash flow is going to just a handful of chips (GPUs/CPUs and HBM) and no one else,” he said.
Optimism was further bolstered by Qualcomm, which projected $15 billion in data center sales by 2029, sending its stock up almost 4%.
For now, Micron’s stellar quarter has bought the sector breathing room, easing concerns that AI’s capex binge might not deliver commensurate returns.
“While tech is enjoying a big relief rally this morning, the memory mania has some dark sides, including pressuring the free cash flow at hyperscalers and driving inflation higher throughout the economy,” Crisafulli added.
Countering Micron was a sharp move lower in Apple, with the stock closing 6.1% lower. The tech behemoth raised prices for its MacBooks, iPads, and home devices to offset rising costs from an ongoing memory chip and storage shortage. The sheer size of the price hikes caught investors by surprise.
PCE data comes largely in-line, GDP growth revised higher
Away from tech, market participants on Thursday were focused on a host of U.S. economic data. The highlight was the May core personal consumption expenditures (PCE) price index, widely seen as the Fed’s preferred inflation gauge.
The core PCE rose 0.3% M/M and 3.4% Y/Y in May, in-line with consensus estimates and ticking up slightly from April. On a headline basis, PCE increased 0.4% M/M and 4.1% Y/Y in May, versus estimates of a climb of 0.5% and 4.1%, respectively. The May core and headline PCE readings on a Y/Y basis are significantly above the Fed’s inflation target of 2%. They are also the highest readings since April 2023 and October 2023, respectively.
The data arrives at a time of rapidly shifting dynamics in the outlook for monetary policy. The effective closure of the critical Strait of Hormuz — a vital waterway for a fifth of the world’s oil and gas — since the start of the U.S.-Israeli joint assault on Iran at the end of February led to the biggest supply disruption in history and surging oil prices. That in turn created an inflationary shock and forced central banks across the globe to either hike interest rates or hint at them.
Last week, the Fed joined the party after signaling a much more hawkish set of economic projections than expected under the leadership of new chair Kevin Warsh. The central bank’s updated dot plot showed at least half of the Federal Open Market Committee policymakers anticipating rate hikes this year. Market participants rushed to reprice their rate hike bets following the Fed’s hawkish turn.
But the signing of an interim peace deal between the U.S. and Iran earlier this month and the subsequent uptick in shipping traffic through the Strait of Hormuz has led to a slide in oil prices, with expiring in September, the global benchmark, hitting levels from just before the start of the Middle East conflict. Inflationary concerns are rapidly declining, and Wall Street largely believes that the May PCE report represents a peak in terms of showing an inflationary impact from surging crude.
“The Fed will focus on the pickup in core inflation in today’s data releases and see in it a stronger rationale for higher rates over the next 12 months. Even so, the Fed will likely play wait-and-see at their next meeting in July, since inflation shocks from tariffs and the Iran war are fading,” Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, said.
“If the unemployment rate holds steady and core inflation improves, the Fed could remain on hold in the second half of the year. Housing is a big near-term downside risk to inflation, since high mortgage rates and slow job growth are keeping a lid on housing demand, while housing supply has increased after lots of single-family and rental construction in the last few years,” he said.
“But if core inflation persists around current levels in September, or if labor supply bottlenecks have started to push down the unemployment rate, a hike would become likely. The big near-term upside risks to inflation are from the AI boom putting upward pressure on electronics and energy prices, and from labor-intensive services provided by industries with high proportions of foreign-born workers,” Adams added.
Separately, a final reading on first-quarter was revised upward to a growth of 2.1% from 1.6% in the prior estimate. Analysts had expected GDP growth of 1.6%. Additionally, the number of Americans filing for initial jobless claims in the past week slipped to 215k, lower than the expected figure of 225k.
Oil prices rebound after pre-war lows amid new attack in Hormuz
Turning to the Middle East, the United Kingdom Maritime Trade Operations (UKMTO) said it had received a report of an attack on a cargo vessel in the Strait of Hormuz near Oman. The UKMTO added that an unknown projectile had caused damage to the vessel’s bridge but left no casualties.
The Wall Street Journal later said that two senior U.S. officials had confirmed that the vessel was a Singapore-flagged cargo ship that was attacked by Iran’s Islamic Revolutionary Guard Corps.
The attack would mean a diplomatic setback after President Donald Trump last week inked an interim peace deal with Iran that ended fighting on all fronts and reopened the strait. Tanker traffic has indeed been improving through the vital waterway this week, with Kpler data showing confirmed crossings doubling to 70 on Wednesday from the previous day.
Against this backdrop, oil prices were higher on Thursday, a day after closing at their lowest levels since just one day before the start of the U.S.-Israeli joint assault on Iran at the end of February.
Ambar Warrick, Ayushman Ojha, Pranav Kashyap, and Senad Karaahmetovic contributed to this article