Wall Street ends higher, investors juggle Fed nerves with AI enthusiasm

NEW YORK – Wall Street’s main indexes closed higher on March 18, with mega-cap growth stocks such as Alphabet and Tesla supporting a rebound in the technology-heavy Nasdaq, while investors also waited anxiously for the United States Federal Reserve’s meeting this week.

Google’s parent Alphabet provided a sizeable boost to the market after a media report that Apple is in talks to build Google’s Gemini artificial intelligence (AI) engine into the iPhone.

This supported the communication services sector, which ended up almost 3 per cent, leading gains among the 11 major S&P 500 sectors after hitting its highest level since September 2021.

Tesla shares finished up 6.3 per cent, leading S&P 500 percentage gains, after the electric vehicle (EV) maker said it would soon increase the price of its Model Y cars in parts of Europe.

Nvidia shares added 0.7 per cent but closed well below its session high. The AI poster-child kicked off its annual developer conference as investors waited for new chip announcements from chief executive Jensen Huang.

Investors were torn between enthusiasm about the prospects for AI in the technology sector and worries ahead over the Fed’s policy update on March 20, according to Ms Lindsey Bell, chief strategist at 248 Ventures in North Carolina.

“This is a market that really wants to hold on to the momentum trade, but what’s really weighing on investors’ minds is what happens with the Fed this week,” said Ms Bell.

“The market is sitting comfortably, with the first cut coming in June or July, but not entirely confident it’ll be the case. The question is if it gets pushed out further.”

The Dow Jones Industrial Average rose 75.66 points, or 0.20 per cent, to 38,790.43; the S&P 500 gained 32.33 points, or 0.63 per cent, to 5,149.42; and the Nasdaq Composite gained 130.27 points, or 0.82 per cent, to 16,103.45.

The Nasdaq snapped three straight days of losses.

The Philadelphia Semiconductor index gave up gains to end the day virtually unchanged, while the S&P 500 technology index finished up 0.5 per cent.

Of the S&P’s 11 major sectors, the weakest were rate sensitive real estate and healthcare, with both off 0.02 per cent.

Stronger-than-expected inflation figures have prompted traders to rethink when and by how much policymakers will lower rates in 2024, with traders pulling back the probability for a June rate cut to around 51 per cent from about 71 per cent just a week ago, according to the CME FedWatch Tool.

If the Fed were to take a hawkish tone when its policy meeting concludes on March 20, this could pressure stocks.

“The fact we’re up today provides investors with an opportunity to take profits ahead of the Fed, which is more likely to disappoint than to support the recent rally in risk assets,” said Mr Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in Charlotte.

Goldman Sachs analysts on March 18 said they now expect three interest rate cuts in 2024, compared with four expected earlier, after inflation came in a bit firmer than expected.

“With the market near recent highs, it’s very difficult to see what could provide an upside spark from here. It’s not hard to imagine the things that could cause disappointment,” said Mr Samana, citing the Fed and high valuations for tech stocks.

Exchange operator Nasdaq said it resolved an issue related to connectivity and stock orders that had affected early trading for more than two hours on March 18.

US-listed shares of Xpeng added 1.9 per cent on its plans to launch a cheaper EV brand amid fierce price competition.

Boeing finished down 1.5 per cent after a media report that a federal grand jury in Seattle issued a subpoena to the planemaker over the Jan 5 mid-air blow-out of a Boeing door plug on an Alaska Airlines flight.

Super Micro Computer, which joined the S&P 500 on March 18, gave up earlier gains to close down 6.4 per cent, making it the biggest percentage decliner on the day in the benchmark index.

However, the stock, which has rallied furiously recently on bets it would benefit from AI, is still up more than 252 per cent for the year to date.

Advancing issues outnumbered decliners by a 1.17-to-1 ratio on the New York Stock Exchange, where there were 224 new highs and 58 new lows.

On the Nasdaq, 1,905 stocks rose and 2,400 fell as declining issues outnumbered advancers by about a 1.26-to-1 ratio.

The S&P 500 posted 41 new 52-week highs and one new low, while the Nasdaq recorded 102 new highs and 131 new lows.

On US exchanges, 11.16 billion shares changed hands compared with the 12.41 billion average for the last 20 sessions. REUTERS