(Updates to midafternoon trading, adds analyst comments and market details)
* Indexes: Dow up 0.29%, S&P 500 up 0.06%, Nasdaq off 0.05%
* Alphabet dips on plans to raise $80 billion for AI buildout
* Marvell jumps on Nvidia’s CEO calling it the next trillion-dollar company
* Software shares down following a strong rebound rally
By Stephen Culp and Medha Singh
NEW YORK, June 2 (Reuters) – Wall Street stocks were muted on Tuesday as risk appetite driven by AI fervor was counterbalanced by tensions arising from U.S.-Iran talks to reopen the Strait of Hormuz and end the months-long war.
Gains in seven of the 11 major S&P sectors kept the S&P 500 and the Dow afloat, with the small-cap Russell 2000 outperforming its larger-cap peers. The Nasdaq was nominally lower.
Small-cap stocks have been some of the biggest beneficiaries of the ongoing enthusiasm surrounding artificial intelligence stocks, which provided some upside muscle, with the Philadelphia SE Semiconductor Index advancing 4.6%.
The Software & Services Index, battered in recent months over worries of AI disruption, was off 3.4%.
Strong results from Hewlett Packard Enterprise and a funding commitment from Alphabet reinforced confidence in the AI buildout.
“It’s a mixed market today with the S&P up slightly, but mid-caps and small-caps are having a nice day, sort of for a change,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
Tehran is studying a U.S. proposal to bring the war to a halt, but has not been in contact with Washington for days, according to Iranian media, which also said Iran is taking a “stern” approach, given what it views as a history of U.S. noncompliance and mutual distrust. Simultaneously, Israel is continuing its strikes on Lebanon, despite Tehran’s warnings that the attacks are threatening to derail the fragile truce.
The war has sent crude prices soaring, reviving worries over inflation and giving rise to an increasing likelihood that the U.S. Federal Reserve could hike interest rates by year-end. Cleveland Fed President Beth Hammack said on Tuesday that such a hike could become necessary if already-elevated inflation pressures continue to mount. On the economic front, a report from the Labor Department showed an unexpected spike in job openings, driven by the volatile professional and business services sector. Otherwise, hiring, firing and quits all decreased, suggesting a slowdown in labor market churn in the face of uncertainties related to strife in the Middle East and inflationary effects.
“If you talk to recent college graduates, you know they’re having a hard time getting jobs,” Ghriskey added. “That’s not necessarily showing in the data, at least not yet.”
Analysts look to the May employment report due on Friday, which is expected to show the U.S. economy added 85,000 jobs last month, a monthly deceleration of 26.1%. The unemployment rate is forecast to stand pat at 4.3%.
The Dow Jones Industrial Average rose 149.01 points, or 0.29%, to 51,227.89, the S&P 500 gained 4.85 points, or 0.06%, to 7,604.81 and the Nasdaq Composite lost 13.96 points, or 0.05%, to 27,072.85.
Among the 11 major sectors of the S&P 500, utilities were up the most, while communication services suffered the steepest percentage loss.
Hewlett Packard Enterprise jumped 15.5% after the AI server maker pulled forward its long-term financial targets by two years. In further evidence of AI buildout, Alphabet said it was looking to raise $80 billion in equity offerings, including an investment from Berkshire Hathaway, to fund a costly expansion of its AI infrastructure. Its shares slipped 2.5%. Marvell Technology’s shares surged 28.9% after Nvidia Chief Executive Officer Jensen Huang called the chipmaker the next “trillion-dollar company” at the Computex conference in Taipei. Nvidia invested $2 billion in Marvell in March.
A 5.5% drop in bitcoin hit cryptocurrency firms. Coinbase was down 4.9% while Strategy Inc sank 8.8%.
Broadcom reports quarterly results on Wednesday.
Advancing issues outnumbered decliners by a 1.42-to-1 ratio on the New York Stock Exchange. There were 444 new highs and 118 new lows on the NYSE.
On the Nasdaq, 2,266 stocks rose and 2,469 fell as declining issues outnumbered advancers by a 1.09-to-1 ratio.
The S&P 500 posted 25 new 52-week highs and 16 new lows while the Nasdaq Composite recorded 117 new highs and 83 new lows.
(Reporting by Stephen Culp in New York; Additional reporting by Medha Singh and Twesha Dikshit in Bengaluru; Editing by Matthew Lewis)
