Most of the U.S. stock market rose on Friday after oil prices retreated to levels seen before the conflict with Iran, but declines in artificial-intelligence stocks tempered gains. The S&P 500 was virtually unchanged after recovering from an early loss of 0.9%. The index, central to many 401(k) accounts, remains on track for its second losing week in the last 13, largely due to drops in stocks swept up in the AI mania.
Oil Price Drop Boosts Fuel-Sensitive Stocks
The Dow Jones Industrial Average gained 39 points, or 0.1%, as of 10:45 a.m. Eastern time, while the Nasdaq composite slipped 0.2%. Stocks received a boost as Brent crude oil, the international benchmark, fell 3.9% to $72.53 per barrel. That price is essentially where it stood before the United States and Israel attacked Iran, an event that led to the closure of the Strait of Hormuz and reduced global oil shipments.
Lower oil prices helped companies with large fuel expenses. United Airlines rose 1.7% as a result.
Health Care Stocks Gain on European Approval News
Health care stocks were among the strongest forces pushing the market upward after a committee of the European Medicines Agency recommended several medicines for approval and extended therapeutic indications for a dozen others. Eli Lilly saw its stock jump 6.3% following the announcement.
Beyond Lilly, roughly two out of every three stocks within the S&P 500 were rising. However, further declines in AI stocks overshadowed these gains.
AI Stocks Under Pressure Amid Profit Concerns
After soaring to tremendous heights and leading the market for years, AI stocks have recently come under pressure due to worries that their profits cannot keep pace with the tremendous rallies in their stock prices. These drops have an outsized effect because AI stocks have grown into Wall Street's largest and most influential, giving their price movements more weight on indexes than others.
Micron Technology's drop of 4.1% was one of the heaviest weights on the market. The memory chip maker has been a big winner this year, with its stock roughly quadrupling, as the AI boom created a surge in demand for its products. But investors saw the downside of that surge on Thursday, when Apple announced it had to raise prices on many products by significant percentages to compensate for higher memory costs. The worry is that such price increases could ultimately lead to lower demand.
SpaceX Stock Dips Amid AI Volatility
Highlighting the roller-coaster ride for AI stocks, SpaceX dipped 0.8% below $152, approaching its lowest level since its ballyhooed Wall Street debut earlier this month. After initially selling its stock at $135 per share, SpaceX's stock price briefly soared above $225 within its first few days of trading. Besides rockets, Elon Musk's company also owns the xAI artificial-intelligence business.
The day's largest loss in the S&P 500 was a 21.1% drop for Onsemi, which announced it agreed to buy Synaptics in an all-stock deal valued at roughly $7 billion.
Bond Yields Ease, Asian Markets Slide
In the bond market, Treasury yields eased alongside oil prices. The yield on the 10-year Treasury fell to 4.37% from 4.40% late Thursday. High yields in bond markets worldwide, driven by inflation concerns, have threatened to slow economies and have already pushed up rates for mortgages and other loans. High yields also hurt prices for investments, particularly those seen as most expensive, raising pressure on AI winners.
Asian stock markets began Friday with sharp drops due to losses for AI winners. In Japan, a 12.5% plunge for Softbank Group Corp helped pull the Nikkei 225 down by 4.2%. The company is a major investor in OpenAI, the maker of AI chatbot ChatGPT. A report in The New York Times suggested OpenAI is considering delaying its initial public offering of stock to next year from the second half of this year. Such an IPO would give OpenAI the chance to raise more cash for data centers, as well as allow early investors like Softbank to cash out some holdings. But recent stumbles for SpaceX's stock and AI stocks broadly may signal less appetite for big AI names among investors.
In South Korea, SK Hynix fell 8.4%, and Samsung Electronics sank 5.3%, helping pull the Kospi 5.8% lower and trimming its gain for the year so far to 99.6%.
