(May 13): US equities were under pressure early Wednesday as Wall Street assessed another hot inflation print against strong corporate profits from technology firms.
The S&P 500 Index dipped 0.2% as of 9:53am in New York, while the Nasdaq 100 Index wobbled between small gains and losses. Chipmakers, opticals and storage firms held onto an advance as supply for global memory chips, critical to artificial intelligence infrastructure build-outs, tightened further. Nvidia Corp rose 1.2% as chief executive officer Jensen Huang joins President Donald Trump on his visit to China.
US wholesale inflation accelerated in April to the fastest pace since 2022 on a war-driven increase in energy prices that’s feeding into higher freight transportation costs. The producer price index rose 6% from a year ago, according to Bureau of Labor Statistics data out Wednesday, eclipsing economist estimates and coming in after a hot consumer price readout.
Trump repeated his military threats against Iran ahead of his China trip. Tehran’s effective closure of the Strait of Hormuz will be at the top of the agenda in talks between the US president and China’s President Xi Jinping.
Investors have been grappling with crosscurrents from a resurgence in inflation, while robust corporate earnings and the profit potential of AI continue to underpin confidence in the economy and stock market. First-quarter profits at S&P 500 companies have surged 27% so far, more than double the roughly 12% analysts had expected — the fastest year-on-year earnings growth outside of recoveries from major shocks since 2004.
Optimism surrounding the potential for industrial companies to profit from the AI boom has also fueled record-setting momentum in the sector.
See also: Chip stocks sink as inflation woes boost US yields
A gauge of 45-day correlation between the S&P 500 Industrials Sector, home to stocks like Deere & Co and Fastenal Co, and the Philadelphia Stock Exchange Semiconductor Index is sitting at 0.75, near the highest level since June. A reading of 1 means the securities move in lockstep. Worries are mounting that the group’s link to AI may be getting too tight.
To Max Kettner, chief multi-asset strategist at HSBC Holdings Plc, stocks can rally further as a powerful recovery in earnings and still-low positioning outweigh the threat from rising bond yields. The reporting season has been “crazy, just absolutely crazy,” with almost 87% of companies beating expectations in a performance that resembled the post-Covid reopening, he said in an interview with Bloomberg Television.
Equities remain the most favored asset class in the global allocations, with a preference for the US driven by a better risk-reward profile and earnings potential, according to Morgan Stanley’s cross-asset strategists.
See also: US stocks retreat on hotter-than-forecast core CPI, jump in oil
In individual company news, Claude-maker Anthropic PBC is in early talks with investors to raise at least US$30 billion ($38.2 billion) in fresh financing, according to people familiar with the matter, setting the stage for what could be its largest funding round yet.
SoftBank Group Corp reported a surge in quarterly profit due to valuation gains on its OpenAI investment. US-listed shares of Alibaba Group Holding Ltd were down after the online marketplace’s fourth-quarter results were weaker than expected on key metrics.
Uploaded by Magessan Varatharaja
