US stocks closed mixed as a rotation out of high-flying tech stocks into other parts of the market continued after a trading update from Advanced Micro Devices failed to quell doubts about extravagant AI stock valuations.
A late partial recovery trimmed the S&P 500's loss to 0.51%. The Nasdaq Composite shed 1.51%. The Dow Jones Industrial Average put on 260 points or 0.53% as some of the cash exiting tech flowed into value stocks.
AI chip stocks fell after an underwhelming sales forecast from AMD. Shares in the company skidded 16.2%. Rivals Nvidia, Broadcom and Micron Technology also posted solid falls despite bullish comments from AMD CEO Lisa Su. “AI is accelerating at a pace that I would not have imagined,” Su told CNBC. The PHLX Semiconductor Index of chipmakers slumped 4.36%.
Software companies continued to slide in the wake of the launch of an AI legal assistant this week. Software companies sank amid speculation that cheap AI tools could replace licensed software in dozens of other industries. Oracle, CrowdStrike, Snowflake and Datadog all fell. "If you've got legacy software that's old and clunky, you're a ripe target for AI. We're a bit bearish on software in general, with the whole impetus of AI," Josh Chastant, Portfolio Manager, public investments at GuideStone Funds, told Reuters.
The S&P value index climbed for a fifth day as funds flowed out of growth sectors into value counterparts. “It’s just a natural rotation,” Scott Welch, chief investment officer at Certuity, told CNBC. “It’s been such a large cap growth-dominated space for so long — value was just punished, small cap was punished and non-U.S. markets were just kind of ignored when, in fact, they basically doubled the results of the domestic market last year.”
Seven of the S&P's eleven sectors rose, led by energy +2.25%, materials +1.8% and real estate +1.53%. The drags were utilities, plus the three sectors dominated by Big Tech (I.T., communication services and consumer discretionary).
Gold gave up early gains as the US dollar extended its rebound from last month's four-year low. The US dollar index climbed towards its highest in a week and a half, raising prices for buyers using other currencies. "We did see a turnaround in the dollar, and that strength put some pressure on gold," David Meger, director of metals trading at High Ridge Futures, told Reuters. Spot gold was lately down US$8.72 or 0.18% to US$4,937.87 an ounce after gaining more than 3% in early action. Earlier, US gold futures settled US$15.80 or 0.3% ahead at US$4,950.80. Spot silver was trading US$2.11 or 2.48% ahead at US$87.20, well above Monday's February low of US$71.33 but also some distance from last week's record US$121.64.
Copper fell in London as rising stockpiles and caution amid turmoil on precious metal markets outweighed hopes that China will commit to increasing its strategic reserves of the metal. Stocks in warehouses registered by the London Metal Exchange climbed to their highest since March, according to the latest report. Analysts downplayed a call by a state-backed Chinese industry body for the government to expand its copper reserves. Benchmark copper on the London Metal Exchange declined 3.25% to US$13,040 a metric ton. Prices have fallen more than 10% since peaking at US$14,527.50 last week. “You’re seeing volatility in precious metals spill over into copper, though not to the same degree,” Anant Jatia at Greenland Investment Management told Reuters.
Rare earth miners appeared little moved by a Trump administration push to build an international coalition of nations willing to set a price floor for critical minerals to reduce China's control of the market. The European Union, Japan and Mexico agreed to work with the US on new policies - including price floors - to counter China's dominance and reduce the risk of supply-chain disruption. The agreement came after US Vice-president JD Vance told a summit "the international market for critical minerals is failing”. On Wall Street, the Global X Lithium and Battery Tech ETF dropped 1.53%.
Iron ore continued to drift lower in China as steel mills finished restocking ahead of the mid-month Lunar New Year holiday. Most Chinese construction sites have stopped work, according to broker Everbright Futures, meaning lower demand for steel and steel ingredients. Benchmark ore on the Dalian Commodity Exchange struggled for direction before fading 0.32% to US$112.67 a metric ton.
Brent crude rallied back towards US$70 a barrel following reports that US-Iran nuclear talks were collapsing after the US shot down Iranian drones heading towards a US aircraft carrier. Prices eased earlier this week after both sides talked up their willingness to negotiate over Iran's nuclear ambitions.They turned higher overnight after US President Donald Trump said Iran's Supreme Leader Ayatollah Ali Khamenei "should be very worried". This morning the international oil benchmark settled US$2.13 or 3.16% higher at US$69.46 as traders priced back in the risk of a conflict that could impede the flow of oil from the Middle East.
