Stock market news: More drops for tech stocks weigh on Wall Street

NEW YORK — Technology stocks are continuing to fall on Wednesday, and the S&P 500 index is on track for its first back-to-back drop in three weeks.

The main measure of Wall Street’s health slipped 0.6 per cent. The Dow Jones Industrial Average was down 314 points, or 0.6 per cent, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.8 per cent lower.

More drops for stocks swept up in the artificial-intelligence boom dragged indexes lower. After roaring to records and pulling the market up with them, AI stocks took a sudden turn lower last week. Among the worries is that their prices have simply shot too high, too fast.

Super Micro Computer, which sells AI servers, tumbled 13.5 per cent after saying it plans to raise US$7 billion in cash by selling shares of stock and convertible preferred stock. Such moves raise the most money for companies when their stock prices are high, and they can dilute the ownership stakes of existing shareholders.

Micron Technology fell 2.8%, chipping more away from its tremendous gain for the year so far. A week ago, the computer memory maker’s stock was up nearly 280%. Now, its year-to-date gain is down to 218.2%.

U.S. tech stocks had appeared to be heading for even sharper losses early Wednesday, based on futures contracts, but an update on U.S. inflation that arrived an hour before trading began helped pare the losses.

The report said inflation accelerated to its highest level in three years, but that was exactly what economists had forecast. An important underlying measure of inflation, meanwhile, slowed by slightly more in May from April than economists expected.

That helped Treasury yields ease a bit in the bond market, which in turn relaxed some of the pressure that’s built up on the stock market.

High bond yields can slow entire economies and undercut prices for all kinds of investments, including stocks and cryptocurrencies. They particularly hit investments seen as the most expensive, and some critics are calling AI a bubble where investment inflated too far.

The yield on the 10-year Treasury edged down to 4.52% from 4.53% just before the inflation report’s release. The two-year Treasury yield, which more closely tracks expectations for what the Federal Reserve will do with its overnight interest rates, eased to 4.11% from 4.13% just before the report.

Traders have been building bets recently that the Fed will have to hike its main interest rate at least once this year, given how high inflation is and how strong the U.S. job market remains. Wednesday’s inflation update caused them to trim their bets, but only by a smidgen, according to data from CME Group.

Keeping things uncertain are continued swings for crude oil prices, which have been rising and falling with hopes that the United States and Iran can reach a deal to reopen the Strait of Hormuz to oil tankers.

The price for a barrel of Brent crude oil rose 1.1% to $92.43 after President Donald Trump warned Iran would “pay the price” for stalled negotiations between the two on their war.

In stock markets abroad, indexes in Europe pared their losses following the update on U.S. inflation. In Asia, the losses were sharper.

South Korea’s Kospi dropped 4.5%, hurt by losses for tech giants Samsung Electronics and SK Hynix.

Tokyo’s Nikkei 225 sank 1.9% after data showed Japan’s producer price index, a measure for prices at the wholesale level, rose in May at the fastest pace in more than three years. Shares of technology and telecommunications giant SoftBank Group, which has a strong AI focus, lost 8.3%.

AP Business Writers Chan Ho-him and Matt Ott contributed to this report.