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Wall Street hangs near its records as it closes another winning week
By: The Associated Press//May 17, 2024//
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NEW YORK (AP) — U.S. stocks are drifting near their records Friday as Wall Street heads for the finish of another winning week.
The S&P 500 was basically flat in morning trading and on track for a fourth straight week of gains. The Dow Jones Industrial Average was up 59 points, or 0.1%, a day after briefly topping the 40,000 level for the first time. The Nasdaq composite was virtually unchanged, as of 10:05 a.m. Eastern time.
Despite the placid movements for indexes, some feverish action was roiling underneath. Reddit jumped 15.5% after announcing a partnership where OpenAI will bring the social-media company’s content to ChatGPT and become an advertising partner, among other things. Wall Street’s frenzy around artificial-intelligence technology has continued to build despite some warnings of a potential bubble.
On the losing end was GameStop, which gave back more of its massive gains won at the start of the week.
GameStop dropped 25.4% after it said it expects to report a loss of $27 million to $37 million for the three months through May 4. It also said it could sell up to 45 million shares of stock in order to raise cash.
Such moves can dilute the holdings of current shareholders, and it follows a similar move by AMC Entertainment. After its stock price also got caught up in a rocket ride, the movie-theater chain said earlier this week it would issue nearly 23.3 million shares of stock to wipe out some debt. Much of the whipsaw action for it and GameStop was more the result of enthusiasm among investors than any announcement that would change the companies’ profit prospects.
Not all of them were necessarily smaller-pocketed investors. Renaissance Technologies, the hedge fund founded by pioneering investor Jim Simons, bought shares of both GameStop and AMC Entertainment before the end of the first quarter, which ended March 31.
Elsewhere in financial markets, Treasury yields were holding relatively steady, and stock indexes around the world were mixed.
This week has been a good one for markets broadly after a report rekindled hopes that inflation is finally heading back in the right direction after its discouraging start to the year. That in turn has revived hopes for the Federal Reserve to cut its main interest rate at least once this year.
The federal funds rate is sitting at its highest level in more than two decades, and a cut would goose investment prices and remove some of the downward pressure on the economy.
The hope is that the Fed can pull off the balancing act of slowing the economy enough through high interest rates to stamp out high inflation but not so much that it causes a bad recession.
Of course, now that many traders are betting on the Fed cutting rates two times this year or more, some economists are cautioning optimism may be going too far. It’s something that happens often on Wall Street.
While data reports recently have been better than forecast, “better than expected doesn’t mean good,” economists at Bank of America wrote in a BofA Global Research report.
Inflation is still higher than the Fed would like, and Bank of America’s Michael Gapen still expects the Fed to hold its main interest rate steady until cutting in December.
In the bond market, the yield on the 10-year Treasury rose to 4.39% from 4.38% late Thursday. The two-year yield, which more closely tracks expectations for the Fed, edged down to 4.79% from 4.80%.
In stock markets abroad, indexes jumped 1% in Shanghai and 0.9% in Hong Kong after China’s central bank announced moves to bolster its struggling property market. It reduced required down payments for housing loans and cut interest rates for first and second home purchases, among other moves.
Indexes fell in Seoul, Tokyo and across much of Europe.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
