FILE - The New York Stock Exchange is shown on June 18, 2024 in New York. (AP Photo/Peter Morgan, File)
NEW YORK (AP) – Wall Street’s split widened, as smaller stocks and other formerly unloved areas of the market rose up while superstar Big Tech stocks gave back more of their huge gains. Most stocks climbed Thursday after a surprisingly strong report on the U.S. economy raised hopes for profits at smaller companies. Continued weakness for a pocket of Big Tech stocks including Nvidia and Microsoft weighed on the S&P 500, however, and the index fell 0.5% after a healthy gain from earlier in the day evaporated. The Dow Jones Industrial Average rose 0.2%, and the Nasdaq composite lost 0.9%.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) – U.S. stocks are stanching the bleeding on Thursday, a day after their worst losses since 2022 led to a wipeout for financial markets around the world.
Most stocks on Wall Street climbed after a surprisingly strong report on the U.S. economy raised hopes for profits at smaller stocks and other formerly unloved areas of the market. Continued weakness for a pocket of Big Tech stocks, though, weighed on the S&P 500, and the index was basically flat in late trading after a healthy gain from earlier in the day evaporated.
The Dow Jones Industrial Average was up 223 points, or 0.6%, as of 3:10 p.m. Eastern time, and the Nasdaq composite was 0.2% lower.
Keeping the market in check were losses of 1.8% loss for Microsoft and 1.9% for Alphabet. They were following up on sharp losses from a day earlier, when investors pummeled Big Tech stocks after profit reports from Alphabet and Tesla underwhelmed and raised concerns that the market’s frenzy around artificial-intelligence technology had sent prices too high.
Whether the handful of stocks known as the “Magnificent Seven” are rising or falling makes a huge impact on Wall Street because they’ve grown so mammoth in market value. That gives their stock movements extra sway on the S&P 500, and the Magnificent Seven have been the main reasons the index has set dozens of all-time highs in 2024.
For much of the year, Big Tech’s strength masked weakness for other stocks, which struggled with high interest rates meant to get inflation under control. But Thursday’s report on the economy raised hopes that profits will strengthen for all kinds of companies and sparked a widespread rally among formerly beaten-down investments.
The economy’s growth accelerated to an estimated 2.8% annual rate from April through June, double the rate from the prior quarter. Perhaps just as importantly for Wall Street, the report wasn’t so hot that it fanned worries about upward pressure on inflation.
A report on Friday about the Federal Reserve’s preferred measure of inflation could shake things up, but “it’s a struggle to find data points or indicators that hint at inflation still being a significant concern,” according to Yung-Yu Ma, chief investment officer at BMO Wealth Management.
Because inflation has largely resumed its slowdown, the widespread expectation among traders has been for the Federal Reserve to begin cutting its main interest rate from the highest level in more than two decades. Following Thursday’s report, traders still see a 100% probability that the Fed will begin doing so in September, according to data from CME Group.
Cuts to rates would release pressure that’s built up on both the economy and financial markets, and investors are thinking it could offer a particularly big boost to smaller stocks and other formerly downtrodden areas of the market.
The Russell 2000 index of smaller stocks jumped 1.7%, doing better than other market indexes. It’s up about 9% this month, versus a slight loss for the big stocks in the S&P 500.
In the bond market, the yield on the 10-year Treasury slipped to 4.26% from 4.28% late Wednesday. It’s down significantly from its perch above 4.70% reached in April, which gives a strong boost to stock prices.
IBM was one of the biggest reasons for the Dow Jones Industrial Average’s climb, and it rose 5.3% after delivering stronger profit and revenue than expected for the last quarter. It also raised its forecast for how much cash it will generate this year, saying its AI business has been strong.
ServiceNow was the strongest forces pushing upward on the S&P 500. The company, whose platform helps businesses connect seemingly disjointed systems, jumped 15.1% after delivering stronger profit and revenue than expected. It also raised its forecast for subscription revenue this year.
Airline stocks flew higher after American Airlines Group and Southwest Airlines both reported profits for the spring that topped analysts’ expectations. Southwest also announced a break from a tradition of 50 years: It will start assigning seats and selling premium seating for customers who want more legroom.
American Airlines climbed 5.2%, and Southwest Airlines rose 6.2%.
On the losing side of Wall Street was Ford Motor, which tumbled 18.1% after reporting profit that fell short of analysts’ expectations. Its second-quarter net income fell as its combustion-engine unit posted a pretax loss because of rising warranty and recall costs.
In stock markets abroad, indexes dropped worldwide following Wall Street’s wipeout on Wednesday. They fell 3.3% in Tokyo, 1.8% in Hong Kong and 1.2% in Paris as worries spread about whether companies globally would meet expectations for profit growth and about potential moves by central banks on interest rates.
Japan’s Nikkei 225 sank to its lowest closing level since April as a strengthening for the Japanese yen’s value against the U.S. dollar continues to hurt shares of the country’s exporters. The yen has been rising on speculation the Bank of Japan will raise interest rates soon, and its next policy meeting ends on July 31.
Chinese stocks fell as investors questioned a central bank decision to cut another key interest rate after several similar moves earlier this week.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
