Key facts
- Wall Street stocks traded mixed on Tuesday.
- AI enthusiasm was tempered by U.S.-Iran tensions.
- The S&P 500 and Dow Jones Industrial Average gained.
- The Nasdaq Composite was nominally lower.
- Small-cap stocks, including the Russell 2000, outperformed.
- Alphabet announced an $80 billion equity offering for AI infrastructure.
- Hewlett Packard Enterprise shares jumped 15.5% after pulling forward financial targets.
- Marvell Technology shares surged 28.9% following Nvidia CEO's comments.
- Bitcoin dropped 5.5%, impacting cryptocurrency firms.
- A U.S. Labor Department report showed a spike in job openings.
- Cleveland Fed President Beth Hammack indicated a potential rate hike if inflation persists.
Wall Street stocks traded mixed on Tuesday, with AI enthusiasm tempered by U.S.-Iran tensions regarding the Strait of Hormuz and the ongoing war. Gains in seven of the 11 major S&P sectors supported the S&P 500 and Dow, while the Nasdaq Composite was nominally lower. Small-cap stocks, particularly the Russell 2000, outperformed, benefiting from AI enthusiasm. Hewlett Packard Enterprise jumped 15.5% after pulling forward its long-term financial targets, reinforcing confidence in the AI buildout. Alphabet announced plans to raise $80 billion in equity to fund AI infrastructure expansion, though its shares slipped 2.5%. Marvell Technology's shares surged 28.9% after Nvidia CEO Jensen Huang called the chipmaker a future 'trillion-dollar company'. Bitcoin dropped 5.5%, impacting cryptocurrency firms like Coinbase and Strategy Inc. A U.S. Labor Department report showed an unexpected spike in job openings, though overall labor market churn appeared to be slowing. Cleveland Fed President Beth Hammack indicated that a Fed rate hike might become necessary if inflation pressures continue to mount. Andrew Sheets, Global Head of Fixed Income Research at Morgan Stanley, noted that markets are currently highly correlated, with stocks and bonds moving in unusual lockstep, influenced by energy market perceptions. He stated that the Iran conflict is a significant disruption to global energy supply. However, individual stocks within the S&P 500 are moving with unusual dispersion and independence, which Sheets attributes to the perception that some companies will be incredible beneficiaries of AI while others will be left behind, as well as an attention gap focused on AI-sensitive names. He also noted that while the S&P 500 is near all-time highs, the market's advance-decline line is lower than in previous months. Sheets suggested that if oil prices were to spike significantly, yields would likely fall as growth concerns would increase, potentially flipping the current stock-bond correlation. Mike Dickson, head of portfolio management at Horizon Investments, noted that markets could be in for a heated, melt-up rally where momentum keeps winning, and he would not be surprised to see markets significantly higher by the end of the summer.