Trump's visit to Saudi Arabia boosts artificial intelligence sector stocks
After a stretch of mostly positive gains, Wall Street took a short breather in the middle of the week. The Dow Jones Index dipped 0.2% to close at 42,051 points. The S&P 500 inched up by 0.1%, and the Nasdaq Composite advanced by 0.7%.
The trade conflict between the US and China continues to drive discussions, although there are signs of progress since the weekend. However, no concrete negotiations regarding future tariff levels have begun yet, with the original high tariffs set to be reapplied after 90 days, creating a sense of urgency.
Individual stocks caught investors' attention, with Cisco's Q3 results set for announcement after market close. Analysts at Vital Knowledge expected healthy demand in data centers and enterprise technology areas, solid capital returns, and reasonable valuation from Cisco. However, they anticipated some margin impacts from tariffs. Cisco's stock dropped 0.8% before the results.
KI-related stocks saw demand surge following Saudi Arabia's announcement of a $20 billion investment in KI data centers and energy infrastructure from the US. Nvidia (+4.2%) and AMD (+4.7%) profited again from the partnership announced the previous day with Saudi Arabian Humain, a subsidiary of the sovereign wealth fund. AMD also announced a share buyback, and Super Micro Computer jumped 15.7%. The manufacturer of KI servers partnered with the Saudi Arabian Datavolt.
Apple's stock slipped marginally. Foxconn reported a surge in profits in Q1 but reduced its sales forecast due to tariff concerns. With Foxconn assembling Apple's iPhones and playing an increasing role in building KI servers for US tech giants like Amazon and Nvidia, its financial status has implications for these companies.
Boeing (+0.7%) and GE Aerospace (+0.7%) benefited from an order from Qatar, worth $96 billion, for aircraft and engines from the two companies, as announced by the White House. American Eagle Outfitters reported disappointing Q1 preliminary results and downgraded its forecast for fiscal year 2025, leading to a 6.5% stock drop.
The Dollar Holds Steady Amid Mixed Signals
The dollar stabilized after a recent downturn, but foreign exchange analyst Thu Lan Nguyen of Commerzbank warned the Greenback remains under pressure following US President Donald Trump's repeated calls for interest rate cuts following disappointing US inflation data. Trump took to his Truth Social platform to criticize Federal Reserve Chair Jerome Powell, accusing him of being "too late" to cut rates.
Oil prices dropped after recent strong gains, with Brent and WTI futures falling by up to 1.3% following unexpected rises in US oil inventories. Any deterioration in market sentiment towards trade talks could challenge the recent rally, according to Investec analyst Callum Macpherson.
Gold prices plummeted, with the troy ounce falling 2.1% to $3,181, due to decreased demand for safe havens. Yields on 10-year notes increased by 4 basis points to 4.54%, with Mark Capleton of Bank of America expecting yields to continue rising as foreign investors become unwilling to finance the US deficit, potentially reducing demand for US bonds and pushing yields higher.
The potential implementation of employment policies across EC countries may influence investment strategies, considering the current state of global finance and the ongoing trade conflicts, particularly between the US and China. The recent mixed reactions in US stock markets could have rippling effects on companies relying on foreign suppliers or facing tariff concerns, such as Apple and Foxconn.
