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Wall Street Pauses After AI-Fueled Rally, Eyes Set on Fed and Jobs Data

Wall St paused after AI rally, awaiting Fed & jobs data. Inflation eased, but some stocks fell. All 3 indices gained for the 4th month.

The U.S. stock market displayed indecisiveness on Friday, following a surge in the previous session. The rally was fueled by positive inflation data, hinting at potential interest rate cuts by June, and an ongoing obsession with artificial intelligence (AI).

AI Stocks Continue to Shine

The tech-heavy Nasdaq closed at a record high on Thursday, propelled by gains in AI-related stocks. Chip designer Nvidia, a major player in the AI space, witnessed a 1.4% increase, while its competitor, Advanced Micro Devices (AMD), reached an all-time peak with a 3.1% jump, following a 9% surge the day before.

Inflation Data Provides Support

The positive market sentiment was further bolstered by the release of the personal consumption expenditures (PCE) report on Thursday. The report aligned with expectations, indicating that annual inflation growth has hit its lowest point in three years.

Market Takes a Breather

As of 9:43 AM ET, the major indices displayed mixed results. The Dow Jones Industrial Average dipped slightly by 0.15%, the S&P 500 witnessed a marginal gain of 0.06%, and the Nasdaq Composite edged up by 0.21%.

Energy Sector Leads the Pack

The S&P 500 energy sector emerged as the top performer, enjoying a 1.1% rise due to a lift in crude oil prices.

Investors Await Further Guidance

Market strategist Paul Nolte suggests that investors are taking a breather after digesting the PCE report and are eagerly awaiting insights from Federal Reserve Chair Jerome Powell and key employment data scheduled for release next week. These factors are expected to shed light on the future trajectory of monetary policy.

Fed Official Cautions Against Early Rate Cuts

Richmond Fed President Thomas Barkin emphasized that inflationary pressures persist, and it’s premature to predict when the Fed can begin lowering rates.

New York Community Bancorp Tumbles

Adding to the cautious atmosphere, New York Community Bancorp witnessed a significant 25.7% plunge. This fall stemmed from the regional lender’s disclosure of “material weaknesses” in internal loan review controls, leading to a tenfold revision in its fourth-quarter loss compared to previous reports. The KBW regional banking index consequently dropped by 2.5%.

Market Rallies Continue Despite Friday’s Pause

Despite Friday’s hesitation, the three major indices managed to secure their fourth consecutive monthly gains on Thursday. The S&P 500 even reached a new closing high, fueled by the combined effect of AI enthusiasm and a robust fourth-quarter earnings season.

Mixed Performance Among Individual Stocks

While some companies saw significant gains, others faltered. Cybersecurity firm Zscaler experienced a 10.1% drop following a report of higher operating expenses for the second quarter. Conversely, Dell Technologies enjoyed a 28.6% jump after exceeding Wall Street’s annual revenue and profit forecasts, fueled by optimism surrounding demand for its AI servers.

Positive Outlook for Autodesk and Everbridge

Autodesk rose by 4.5% due to its annual revenue forecast exceeding expectations, reflecting continued strong demand for its design software products. Additionally, Everbridge surged by 24.1% after private equity firm Thoma Bravo revised its offer price, valuing the software company at approximately $1.8 billion.

Market Overview

While the market lacked a clear direction on Friday, individual stocks exhibited varied performances. Declining issues outnumbered advancing ones on both the NYSE and Nasdaq, indicating a cautious undercurrent. The S&P 500 and Nasdaq also witnessed a mix of new highs and lows, reflecting the selective nature of the market’s movement.