On the 9th, U.S. time, all three major U.S. stock indexes in New York closed higher. Fueled by the artificial intelligence boom, semiconductor corporations' shares jumped and led market sentiment. A drop in global crude prices further boosted risk appetite.
On the New York Stock Exchange, the Dow Jones Industrial Average finished at 52,487.41, up 139.02 points, or 0.27%, from the previous transaction day. The Standard & Poor's 500, a gauge of large-cap stocks, rose 0.81% to 7,543.64. The tech-heavy Nasdaq composite gained 1.30% to end at 26,206.89.
Semiconductor-related corporations were strong in the market that day. The VanEck Semiconductor exchange-traded fund, a gauge of overall conditions in the chip industry, climbed 2.5%. Memory chip manufacturer Micron Technology rose 4.5%, leading the advance. News that Micron will invest up to $250 billion in a new plant to strengthen the U.S. semiconductor supply chain acted as a major tailwind. SanDisk shares also surged 7.6%. News that demand for the IPO book-building in SK hynix's U.S. listing process was more than seven times oversubscribed also had a positive impact on the broader semiconductor sector.
By contrast, the market was not rattled by back-to-back news for two days that the U.S. military struck Iran. Usually, when armed conflict between countries continues as in this Iran war, it is a major headwind for stocks. Investors are likely to sell the risky asset of equities and flee to safe assets. But after President Donald Trump said "we received a message that they want negotiations in Iran," stocks strengthened and global crude prices fell. West Texas Intermediate for August settled up 1.06% at $74.29 that day but faced intraday downward pressure.
Analysts said stock investors judged the latest Middle East crisis to be manageable. It means they believe the U.S. economy can easily absorb a shock of this scale. Matt Malley of Miller Tabak said, "Investors are focusing more on upcoming corporations earnings reports than on geopolitical risks."
Wall Street analysts picked corporations earnings as the key factor that will set the market's direction over the next month. Anthony Salimbene of Ameriprise said, "Corporations should at a minimum deliver results that beat market expectations, and then prove even more beyond that." The point is that, while maintaining today's high margins, they must prove that profit growth led by tech is robust enough to support overall market valuations by, for example, raising forward guidance. Brock Wimmer of Edward Jones expected AI corporations' profit growth to remain solid in the second half of this year. He said, "There are still limited signs that corporations are meaningfully cutting artificial intelligence-related spending."
Caution about the profitability of artificial intelligence investments is also growing. Jeff Buchbinder of LPL Financial predicted, "AI will remain a primary driver in the second half of this year, but the market backdrop will become more selective." The advice is that investors should focus less on how much corporations spend and more on how much measurable revenue those investments generate. Torsten Slok, chief economist at Apollo Global Management, warned, "If the payback on AI investments is delayed, it will be a problem for the market as a whole." Apollo Global Management added, "Profit expectations for the mega-cap tech corporations may be overly optimistic, and if their results fall short and share prices drop, they could drag down the broader market."
Macro data and individual corporations earnings were mixed that day. Initial claims for state unemployment benefits came in at 215,000, down 4,000 from the prior week, the U.S. Labor Department released. The figure was below the market forecast of 218,000, showing the job market remains firm. Megan Horneman, chief investment officer at Verdence, said, "Strong economic growth, persistent consumer spending, and massive investment in artificial intelligence are short-term factors stoking inflation."
Among individual names, workplace software corporations Salesforce, Inc. fell 4.5% after KeyBanc downgraded its rating. Snack and beverage corporations PepsiCo beat revenue expectations in the second quarter, but per-share earnings missed, dragging the stock down about 1%. Jeans brand Levi Strauss fell more than 4% as its annual outlook disappointed even though its quarterly results topped estimates.