Wall Street finished just shy of a record Wednesday as artificial intelligence stocks climbed following stronger-than-expected quarterly reports, while a federal report showed U.S. inflation eased slightly to 3.4% in July. The S&P 500 rose 0.3%, supported by cooling bond yields and easing interest rate hike expectations.
AI Stock Rally Lifts Markets Near Record
Stocks in the artificial intelligence technology sector helped lead Wall Street to finish just shy of a record Wednesday after several companies reported stronger-than-expected spring growth, according to Associated Press reporting. The S&P 500 rose 0.3% to 7,748.50 for its first gain since setting an all-time high on Friday. The Dow Jones Industrial Average dipped 21.58 points, or less than 0.1%, to settle at 53,770.27, while the Nasdaq composite climbed 0.5% to 26,588.49.
The gains arrived after stellar quarterly reports from infrastructure and server providers bolstered investor confidence that AI spending is yielding sufficient productivity. Super Micro Computer jumped 19% after reporting earnings per share that were 84% higher than analysts expected alongside robust forward guidance. Meanwhile, CoreWeave surged 19.3% after posting better-than-expected quarterly revenue and a milder loss. CoreWeave CEO Michael Intrator stated that demand is accelerating from customers as big businesses adopt AI. CoreWeave gives its customers access to AI chips from Nvidia, and Nvidia climbed 3%, acting as the single strongest force lifting the S&P 500. Additionally, server producer Super Micro Computer reported earnings per share for the latest quarter that were 84% higher than analysts expected and gave forecasts for upcoming profit and revenue that topped analysts’ expectations.
Inflation Cools to 3.4% as Energy Prices Ease
Wall Street found additional support from easing bond yields following consumer price data. U.S. consumers paid prices for gasoline, groceries, and other living costs that were 3.4% higher last month than a year earlier, according to Bureau of Labor Statistics data cited by AP. While elevated, the rate showed headline U.S. inflation backing off from a three-year high, with trailing 12-month inflation jumping to a three-year high driven almost entirely by the Iran war and the Strait of Hormuz closure halting the flow of a fifth of the world’s petroleum liquid demand and sending gas prices soaring at the fastest pace in over three decades. U.S. July CPI rose 3.4% year-on-year, and core CPI rose 2.5% year-on-year, both matching market expectations.
The deceleration was driven largely by energy dynamics, while underlying pressures persist. Meanwhile, the Iran war changed everything when the president’s decision to attack Iran prompted the latter to shut down the Strait of Hormuz to most maritime traffic, effectively halting the flow of a fifth of the world’s petroleum liquid demand and sending gas prices soaring at the fastest pace in over three decades.
Interest Rate Cut Expectations Shift
The inflation update altered interest rate expectations across financial markets. Wednesday’s economic data prompted traders to pull back on bets regarding Federal Reserve monetary tightening, reducing the probability of a September rate hike. Chicago Fed President Austan Goolsbee stated that inflation is the largest problem facing the U.S. economy, while Boston Fed President Susan Collins stated that if supported by data, she would support a September rate hike.
The shift helped influence Treasury yields. The U.S. Domestic buyer participation was below average, but international buyer demand remained strong, resulting in a bid-to-cover ratio of 2.53 times, showing strong demand though slightly lower than July’s previous level of 2.59 times.
Global Markets and Commodity Reactions
International equities experienced mixed performances amid the shifting macroeconomic landscape. South Korean markets and chip giants saw massive moves, with SK Hynix surging 9% and Micron rising 4.9%. SK Hynix and Samsung stock prices rose over 8%, and the Kospi index climbed up to 5%, with reports that Temasek is considering direct investment in South Korean chip giants. Meanwhile, SpaceX shares surged 9.7% to $146.15, which is 10.8% higher than its IPO issue price of $135, following SpaceX CEO Elon Musk’s projection that AI-based network traffic will reach 1000 times human traffic within five years.
Energy and commodity markets experienced notable reactions. New York crude oil inched up 0.08% to settle at $83.27, and Brent crude rose 0.08% to $88.98. Concurrently, President Donald Trump posted on Truth Social that the U.S. completely controls the Strait of Hormuz, calling the naval blockade a “steel wall” that leaves Iran with no naval or air force, empty financial resources, and a 300% inflation rate.
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