Mixed Market Close as AI Chip News Influences Stocks

The S&P 500 Index ($SPX) (SPY) closed up +0.10% on Wednesday, while the Dow Jones Industrials Index ($DOWI) (DIA) dipped -0.21%. The Nasdaq 100 Index ($IUXX) (QQQ) gained +0.57%. Additionally, June E-mini S&P futures (ESM25) rose +0.07%, with June E-mini Nasdaq futures (NQM25) up +0.57%.

Market Activity and Recent Developments

Stock indexes settled mixed on Wednesday, with the Nasdaq 100 reaching a 2-1/2 month high. The strength in semiconductor stocks supported the overall market. The Trump administration is expected to finalize agreements allowing Saudi Arabia and the UAE greater access to advanced AI chips, with companies like Nvidia, Advanced Micro Devices, and Amazon investing in AI infrastructure and data centers. Notably, the Commerce Department announced the end of the AI diffusion rule from the Biden administration and plans to revise semiconductor export regulations.

However, stocks retreated from peak levels on Wednesday, influenced by the 10-year Treasury note yield rising to a one-month high, following hawkish comments from Fed Vice Chair Jefferson. He indicated a lowered US growth forecast for 2025 while still anticipating expansion. Jefferson cautioned that sustained tariffs could hinder disinflation efforts and cause a temporary uptick in inflation.

Mortgage Applications and Upcoming Economic Indicators

In housing news, US MBA mortgage applications increased +1.1% for the week ending May 9. The purchase mortgage sub-index rose +2.3%, while the refinancing sub-index fell -0.4%. The average 30-year fixed-rate mortgage ticked up +2 basis points to 6.86% from 6.84% the previous week.

Markets will be keeping an eye on tariff developments and potential trade agreements this week. Expectations for April retail sales are steady, with predictions of no change month-over-month and a +0.3% increase excluding autos. Additionally, the April PPI for final demand is anticipated at +0.2% month-over-month and +2.5% year-over-year, while April manufacturing production is expected to decline by -0.3% month-over-month. Friday’s data may reveal an anticipated +2.9% increase in April housing starts to 1.363 million.

Corporate Earnings and Global Market Trends

As Q1 earnings season winds down, over 80% of S&P 500 companies have reported results, with 77% exceeding estimates—the highest rate since Q2 of 2024. Q1 earnings growth stands at +13.1%, outperforming an initial expectation of +6.6%. Projections for full-year 2025 corporate profits for the S&P 500 now estimate a +9.4% rise, a reduction from the earlier forecast of +12.5%.

International markets exhibited mixed results on Wednesday. The Euro Stoxx 50 fell -0.24%, while China’s Shanghai Composite increased, closing up +0.86%. Japan’s Nikkei Stock 225 edged down -0.14%.

Interest Rates Update

On Wednesday, June 10-year T-notes (ZNM25) fell -8 ticks, with the yield rising +6.7 basis points to 4.532% after dropping to a one-month low. The increase in yields reflects a broader sell-off, driven by weakness in European government bonds and rising inflation expectations. The US 10-year breakeven inflation rate also reached a six-week high of 2.398%.

In Europe, government bond yields rose, with the 10-year German bund yield peaking at a one-month high of 2.701%, and finishing at +2.699%. The 10-year UK gilt yield also climbed to a one-month high of 4.723%.

Swaps indicate an 86% likelihood of a -25 basis points rate cut by the ECB at the upcoming June 5 policy meeting.

Stock Movers in Focus

Chips showed notable strength, benefitting the broader market. ARM Holdings Plc (ARM) led Nasdaq 100 gainers, rising more than +5%, with Advanced Micro Devices (AMD) and Nvidia (NVDA) each up more than +4%. KLA Corp (KLAC) and Qualcomm (QCOM) also gained, closing up more than +1%.

Conversely, pharmaceutical stocks faltered. Moderna (MRNA), AbbVie (ABBV), and Bristol-Myers Squibb (BMY) each dropped over -5%. Companies like Merck & Co (MRK), Eli Lilly (LLY), and Pfizer (PFE) saw declines exceeding -3%.

Super Micro Computer (SMCI) gained over +16%, driven by a new multi-year partnership with DataVolt, while Exelixis (EXEL) surged more than +20% after reporting Q1 revenues of $555.4 million and raising its revenue forecast for the year.

On the downside, homebuilders struggled as rising T-note yields dampened housing demand. PulteGroup (PHM) fell more than -4%, joining Lennar (LEN), DR Horton (DHI), and Toll Brothers (TOL) in losses of over -3%.

Investor reactions included a drop of more than -10% for Loar Holdings (LOAR), as plans for a common stock offering were announced. Meanwhile, American Eagle Outfitters (AEO) fell over -6% after withdrawing its fiscal guidance due to economic uncertainty.

Target (TGT) closed down more than -3% following a price target reduction by Oppenheimer, and Cboe Global Markets (CBOE) dropped over -2% after a double downgrade from Morgan Stanley. Consolidated Edison (ED) slipped more than -1% after a downgrade by KeyBanc Capital Markets.

Upcoming Earnings Reports (5/15/2025)

Companies reporting earnings include Advanced Drainage Systems Inc (WMS), Applied Materials Inc (AMAT), Birkenstock Holding Plc (BIRK), Cava Group Inc (CAVA), Deere & Co (DE), Doximity Inc (DOCS), Globant SA (GLOB), Take-Two Interactive Software (TTWO), and Walmart Inc (WMT).

On the date of publication, Rich Asplund did not hold any positions in any securities mentioned in this article. All information is for informational purposes only. For more details, please review the Barchart Disclosure Policy.

The opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.