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Financial Markets 10/26 15:28
NEW YORK (AP) -- U.S. stocks climbed amid a shaky day for markets worldwide,
as AI stocks keep swinging and Brazilian stocks tumble. The S&P 500 rose 0.7%
Monday. The Dow Jones Industrial Average added 0.3%, and the Nasdaq composite
climbed 0.8%. AI-related stocks remained unsettled following weeks of sharp
swings. Later this week will come earnings reports from nearly one out of every
three stocks within the S&P 500. The Federal Reserve and other big central
banks will also announce their latest decisions on interest rates. Brazilian
stocks tumbled following a surprise reelection for Brazil's president.
THIS IS A BREAKING NEWS UPDATE. Check back for updates. AP's earlier story
follows below.
NEW YORK (AP) -- U.S. stocks are climbing Monday amid shaky trading for
financial markets worldwide, as AI stocks keep swinging and Brazilian stocks
tumble.
The S&P 500 rose 0.7% and more than recovered its losses from last week,
pulling within 1.8% of its all-time high set earlier this month. The Dow Jones
Industrial Average was up 110 points, or 0.2%, with a little less than an hour
remaining in trading, and the Nasdaq composite was 0.9% higher.
The strongest lift for the market came from Nvidia, which rose 2.5%. That
helped the chip company recover some of its drop from three straight losing
weeks, its longest such streak since June.
But stocks elsewhere in the artificial-intelligence industry remained
unsettled. They've been swerving on worries about whether their industry's boom
is under threat because of how expensive it's become for companies to borrow
money to build data centers and buy more AI chips.
Meta helps lead the swings
Meta Platforms bounced up and down after outlining plans to raise $35
billion by selling stock to help pay for its AI investments. It also said it
could raise another $60 billion by selling shares of a new class of its stock
once it begins trading. Meta's stock initially dropped more than 2%, but it
quickly flipped to a gain and then pulled back to a loss of 1.3%.
Meta said Nvidia, Advanced Micro Devices and Broadcom have already indicated
they may buy a total of $5 billion of stock in its offering. Those are strong
signals of interest from chip companies that stand to benefit from additional
AI investments. But they also give fuel to critics of "circular financing" who
say it raises the risk if AI isn't as successful as expected.
One big company at the center of the AI boom, Anthropic, gave details Monday
about how much money it's losing as it prepares to sell its stock on the
publicly traded U.S. market for the first time.
Worries remain about borrowing for AI
SpaceX, Elon Musk's rocket company that also runs the xAI business, had
similar swings after it agreed to a roughly $40 billion deal with an entity
managed by Apollo Global Management to lease AI computing power. Its stock
initially fell nearly 2% before flipping to a gain of 1.9% and then moderating
to a rise of 0.5%.
Musk warned over the weekend that hundreds of companies that rent out AI
computing power are under threat because of the difficulty in borrowing money,
saying on his social-media platform, X, that they could face "guppy-level death
and consolidation."
CoreWeave, a company that's borrowed money to buy AI computing power that it
rents to customers over the cloud, has been at the center of investors' worries
in recent weeks. On Monday, it dropped 5.5% quickly after trading began, only
to flip to a gain of 3.6%. Such minute-to-minute swings have become commonplace
for it in recent days.
It's a big week for profit reports
Profit reports from huge tech companies this upcoming week could offer more
details about how spending on AI is going, and whether it's producing the
profits and productivity that proponents promised.
Alphabet and Microsoft will report their latest quarterly results on
Wednesday, with Amazon to follow on Thursday.
Companies across all industries are under pressure to report strong growth
in their profits. Expectations for big growth are what allowed stock prices to
run to records recently despite worries about high inflation, high interest
rates and other concerns.
Verizon Communications fell 3.7% even though it reported a stronger profit
for the summer than analysts expected, as its revenue fell short of forecasts.
Roughly one out of every three stocks in the S&P 500 is scheduled to report
its latest quarterly results this week.
Brazilian stocks tumble following mixed moves in other markets
In stock markets abroad, Brazilian stocks fell sharply after President Luiz
Incio Lula da Silva won reelection in a result that surprised investors.
The worry among investors is that he could increase the government's
spending and put more pressure on its debt. The Bovespa stock index in Brazil
dropped 14.7%.
Other governments around the world are also feeling pressure because of
their high debt loads and worries about strained budgets, including the United
States. France has been at the center of the worries recently following violent
protests in the country.
But yields on French government bonds eased Monday, and its CAC 40 stock
index rose 0.8% for one of the world's better moves. Indexes also rose in other
European markets following a mixed finish in Asia.
The European Central Bank and the Bank of Japan will be meeting to vote on
interest rates later this week.
Yields ease ahead of the Federal Reserve's meeting
In the U.S. bond market, yields fell for longer-term Treasurys. The yield on
the 10-year Treasury dropped to 4.98% from 5.00% late Friday and from more than
5.30% earlier this month.
The two-year Treasury yield rose to 4.71% from 4.69% late Friday. It more
closely tracks expectations for what the Federal Reserve will do with overnight
interest rates, and the widespread expectation is that it will say on Wednesday
that it is leaving the federal funds rate alone following its latest meeting.
The Fed last month hiked the fed funds rate for the first time in three
years in hopes of slowing inflation, which has remained much higher than anyone
would like.
Oil prices swing
The price for a barrel of Brent crude swung between gains and losses through
the day before settling at $110.74, down 0.9%. It remains near the high end of
its range since the war with Iran began. The highest price for the most
actively traded contract in the market for Brent crude since then is nearly
$120, reached in March.
AP Business Writers Michelle Chapman and Elaine Kurtenbach contributed to
this report.
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