NEW YORK (AP) — Artificial-intelligence stocks are tumbling again on Tuesday, and the former superstars that had led the market to records are dragging Wall Street along with them.
The S&P 500 dropped 1.1% after erasing an early gain of 1% and pulled further from its all-time high set a week ago. The Dow Jones Industrial Average was down 283 points, or 0.6%, as of 11:35 a.m. Eastern time, and the Nasdaq composite was 1.9% lower.
Indexes swung lower as companies selling computer chips, memory and other building blocks of the AI boom broke from early gains to losses. Micron Technology went from an early jump of 4.2% to a drop of 4.9%, for example. That's a day after it soared 9.9% and two days after it plunged 13.3%.
The computer memory company’s stock has already tripled so far this year, raising criticism that it’s gone too far, too fast. Following last week’s industrywide sell-off, the question is whether AI stocks are heading for a long downturn or just needed a shake-out to get rid of excessive optimism.
The weakness for AI stocks drowned out the benefit Wall Street got from easing oil prices. The price for a barrel of Brent crude oil dropped 3.3% to $91.12 after briefly topping $98 the day before.
Oil prices have swung up and down as hopes fade and rise that the United States and Iran can reach a deal to reopen the Strait of Hormuz. A reopening would allow oil tankers to resume delivering crude from the Persian Gulf to customers worldwide.
The drop in oil prices helped stocks of airlines, which have been punished by soaring fuel costs. U.S. airlines spent more than $6 billion on jet fuel in April, up 78% from a year earlier, according to government data. Delta Air Lines rose 1.4%, and American Airlines climbed 1.8%.
To make up for their higher fuel bills, airlines have been raising their own airfares. It’s part of the broad, painful acceleration of inflation hitting U.S. shoppers because of the war with Iran. The high oil prices are also pushing bond yields higher worldwide, raising the pressure on stock prices.
Treasury yields eased a bit Tuesday with the fade in oil prices. The yield on the 10-year Treasury edged down to 4.55% from 4.56% late Monday. But it’s still well above its 3.97% level from just before the war with Iran.
The latest monthly updates on U.S. inflation will arrive later in the week, with one on consumer prices coming Wednesday and one on wholesale prices coming Thursday.
Inflation is high enough, and the U.S. job market looks strong enough, that traders on Wall Street largely expect the Federal Reserve will have to raise its main interest rate at least once by the end of this year. Higher interest rates would keep a lid on inflation, but they would also threaten to slow economies and undercut prices for stocks and all kinds of other investments.
The average long-term U.S. mortgage rate has already recently climbed to its highest level in nine months, and high costs to borrow money could discourage the building of AI data centers that are fueling the U.S. economy's growth.
On Wall Street, J.M. Smucker jumped 12.8% after reporting a stronger profit for the latest quarter than analysts expected.
The company behind the Folgers, Hostess and other brands benefited from higher prices charged for coffee and sweet baked goods. It joined the long list of U.S. companies delivering stronger profit growth than analysts expected, which has helped drive the S&P 500 to record after record this year.
United Natural Foods dropped 12.2% after reporting weaker revenue for the latest quarter than analysts expected.
Nuvalent soared 39% after GSK agreed to buy the biotech company for $10.6 billion. The shares of U.K.-based GSK that trade in New York added 0.6%.
In stock markets abroad, indexes were mixed in Europe following bigger moves in Asia.
South Korea’s Kospi jumped 8.2% and nearly recovered Monday’s plunge of 8.3%. It’s been beholden to the performance of big tech stocks like SK Hynix and Samsung Electronics.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this report.
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