U.S. stock markets closed sharply higher rebounding after two days of stiff losses. Positive developments on the Middle East geopolitical conflicts bolstered market participants sentiment in risky assets like equities. AI trade has also regained its mojo ahead of a mega IPO. All three major stock indexes ended in positive territory, registering their best single-day performance since April 8.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) climbed 1.9% or 929.97 points to close at 50,848.75. Notably, 20 components of the 30-stock index ended in positive territory while 10 ended in the red. The tech-heavy Nasdaq Composite finished at 25,809.66, rising 2.5% or 640.16 points on strong performance by AI semiconductor giants.
The S&P 500 advanced 1.8% or 127.31 points to finish at 7,393.30. However, seven out of 11 sectors of the broad-market index ended in negative territory while four finished in positive territory.
The Information Technology Select Sector SPDR (XLK), the Industrials Select Sector SPDR (XLI) and the Materials Select Sector SPDR (XLB) fell 2.3%, 3.4% and 2.3%, respectively. On the other hand, the Consumer Staples Select Sector SPDR (XLP) and the Energy Select Sector SPDR (XLE) rose 1.7% and 1.5%, respectively.
The fear gauge CBOE Volatility Index (VIX) fell 2.2% to 19.44. A total of 20.7 billion shares were traded on Wednesday, higher than the last 20-session average of 20.6 billion. Advancers outnumbered decliners on the NYSE by a 2.74-to-1 ratio. On the Nasdaq, a 2.75-to-1 ratio favored advancing issues.
Positive Developments on the Middle East War
Investors cheered positive news on the U.S.-Iran war front. On Thursday, President Donald Trump wrote in a Truth Social post that he has “cancelled the scheduled strikes and bombings against Iran.” Trump added, “The Naval Blockade will remain in full force and effect until this Transaction is finalized — Time and place of the signing to be announced shortly.”
In the Oval Office, the President told reporters “We have a signing soon, and the documents are in pretty final shape. It should be done and it should be done pretty quickly.”
Following his statement, crude oil prices fell. The U.S. benchmark — West Texas Intermediate crude — futures fell 2.6% to $87.71 a barrel, while the global benchmark — Brent crude — futures dropped 2.9% to settle at $90.38.
AI Chip Stocks Rebound
AI-powered semiconductor stocks rebounded on Thursday recouping the disaster they suffered in the last two days to a great extent. Moreover, investors are keenly waiting for the initial public offering (IPO) of SpaceX shares to begin on Nasdaq this Friday. The company will offer 555.56 million of its shares to raise $75 billion. The IPO price was settled at $135 per share. The IPO is expected to value the company at $1.77 trillion.
Consequently, stock prices of major AI chip and memory developers such as, Advanced Micro Devices Inc. AMD, Intel Corp. INTC and Micron Technology Inc. MU rallied 8%, 9.3% and 11.7%, respectively. Micron currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Economic Data
The Department of Labor reported that the Producer Price Index (PPI) rose 1.1% in May, beating the Zacks Consensus Estimate of 0.6%. This marked the highest monthly gain since November 2022. The metric for April was revised downward to 1.1% from 1.4% reported earlier. Year over year, the headline PPI increased 6.5% in May.
Core PPI (excluding volatile food, energy items and trade services) rose 0.8% in May, surpassing the Zacks Consensus Estimate of 0.5% and April’s data of 0.7%. This reflects the biggest monthly gain since March 2022. Year over year, core PPI increased 5.1% in May, its highest level since October 2022.
The Department of Labor reported that initial claims increased by 4,000 to 229,000 for the week ended June 6, above the Zacks Consensus Estimate of 226,000. The previous week’s data remained the same at 225,000.
Continuing claims (those who have already received government aid and reported a week behind) increased 24,000 to 1.795 million for the week ended May 30. The previous week's level was revised downward by 6,000 to 1,771,000 from 1,777,000 reported earlier.
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Intel Corporation (INTC): Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report
Micron Technology, Inc. (MU): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).