NEW YORK — US stocks swing as Amazon leaps, Apple sinks and rising oil prices add to worries about inflation
By: Stan Choe
Location: New York
Source: The Associated Press
NEW YORK (AP) — The U.S. stock market is swinging between gains and losses on Friday, as Wall Street’s wildJuly remains rocky. Amazon is leaping, but Apple is sinking, and rising oil prices are adding to worries about inflation already squeezing the bond market.
The S&P 500 rose 0.6 per cent after veering between an earlier gain of 0.7 per cent and drop of 0.5 per cent. The Dow Jones Industrial Average was up 282 points, or 0.5 per cent, as of 1:44 p.m. Eastern time, and the Nasdaq composite was 0.8 per cent higher after briefly losing all of an early 1.3 per cent jump.
The market initially seemed to be heading for healthy gains as Amazon leaped 14.9 per cent after reporting much stronger profit for the latest quarter than analysts expected. Its profit more than tripled from a year earlier, thanks in part to an acceleration of growth in its cloud computing business.
Analysts said that could be a signal Amazon’s huge investments in artificial-intelligence technology are paying off, and Amazon increased its forecast for how much it will spend on investments this year.
The stock reaction was similar to what Microsoft got a day before, when it soared to its best day in nearly 18 years on signals that its AI investments may also be yielding higher profits.
Worries have been high on Wall Street that companies pouring billions of dollars into AI data centers may not get enough profit and productivity to make all the investments worth it. That weighed on the broad U.S. stock market, causing its sharp swings throughout July, along with worries that stock prices shot too high for companies selling the processors and computer memory that such “hyperscalers” are scrambling to buy.
Chipmakers swung sharply again on Friday. Micron Technology, for example, went from an early jump of 6.4 per cent to a loss of 2.5 per cent.
More firmly on the losing end of Wall Street was Apple, which dropped 9.6 per cent despite reporting stronger profit for the latest quarter than expected. Its forecast for growth in the current quarter fell short of expectations, which executives pinned on a supply crunch in components getting vacuumed up in the AI boom.
Also pressuring stocks was another rise in oil prices as uncertainty continues about when the war with Iran will allow crude to flow freely again from the Middle East.
The price for a barrel of Brent crude rose 1.4 per cent to US$88.06 after careening between US$72 and US$102 earlier in July.
Higher oil prices have pushed the cost for a gallon of regular gasoline to an average of nearly US$4.11 across the United States, up from US$3.85 a month ago, according to AAA. More expensive oil also puts upward pressure on prices for virtually every product that rides on a ship, plane or truck before it gets to a customer.
The worries about inflation sent yields in the bond market even higher.
The yield on the 10-year Treasury jumped to 4.74 per cent from 4.68 per cent late Thursday and from just 3.97 per cent before the war with Iran sent oil prices shooting higher. That’s a notable move for the bond market, and the yield moves higher when investors’ expectations for inflation, economic growth and other factors in upcoming years are rising.
The leap has already sent the average long-term U.S. mortgage rate to its highest level in a year.
Longer-term yields jumped on Wednesday after the Federal Reserve’s chair, Kevin Warsh, promised again to get inflation back down to 2 per cent but did not say how he plans to get it there. The Fed voted again to keep its main interest rate steady on Wednesday, even though inflation continues to remain well above 2 per cent.
Higher interest rates could keep a lid on inflation, but they could also slow the economy and undercut prices for stocks and other investments. President Donald Trump, who nominated Warsh to lead the Fed, has lobbied for lower interest rates instead of higher.
Warsh has clearly told financial markets that he does not want to give hints about what the Fed will do with interest rates, saying he wants to get direct, “unfiltered” messages from them rather than echoes back of what the Fed has suggested.
But “without clarifying why action was or wasn’t taken already, it’s hard to see how statements about being committed to hitting its inflation target aren’t just a bluff,” according to Brian Jacobsen, chief economic strategist at Annex Wealth Management.
“The Fed is facing a growing credibility problem,” economists at Bank of America wrote in a report. Unless data comes in showing less pressure on inflation in the interim, “it is imperative for the Fed to pass the September test by hiking rates and delivering an internally consistent narrative.”
In stock markets abroad, the swings were even wilder for chip stocks.
Seoul’s Kospi index soared 17.9 per cent for its best day in history. The index is dominated by two tech giants, Samsung Electronics and SK Hynix, which both surged at least 26.8 per cent on Friday.
The Kospi, though, still lost 22 per cent in July despite Friday’s historic move. That’s after it more than doubled in the first six months of the year.
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AP Business Writers Chan Ho-him and Elaine Kurtenbach contributed to this report.