Strong corporate earnings from Coca-Cola and others lift broader market, but AI-related stocks drag on gains amid sustainability concerns.
By yourNEWS Media Newsroom
Most U.S. stocks climbed on Tuesday as companies like Coca-Cola and Sherwin-Williams reported stronger-than-expected spring profits, though declines in AI-related stocks limited the S&P 500’s gains to a modest 0.2%. The Dow Jones Industrial Average rose 1%, while the Nasdaq composite dipped 0.2%.
The pullback in AI stocks was more pronounced globally, with South Korea’s Kospi index plummeting nearly 11% due to sharp declines in chipmakers like SK Hynix and Samsung Electronics. Trading in Seoul was temporarily halted as losses mounted.
Sherwin-Williams surged 8.4%, and Illinois Tool Works gained 4.1% after both companies exceeded analysts’ earnings expectations. These gains underscored the broader trend of stock prices following corporate profits over time, particularly as the U.S. market remains near record highs.
However, expectations for sustained growth have weighed heavily on AI-related stocks, which have been among the market’s biggest winners. Micron Technology, whose stock had more than tripled this year, saw its shares drop 8.4%—the largest drag on the S&P 500. Advanced Micro Devices fell 7.4%, and Applied Materials declined 7.5%.
Concerns are growing about whether the rapid growth in AI-driven demand for chips and computing power is sustainable. Some analysts warn that major spenders on AI infrastructure could scale back investments if the technology fails to deliver expected profits or productivity gains. Additionally, the emergence of lower-cost AI models from China could reduce global demand for high-end memory and computing resources.
“We believe the market was likely spooked by the progress of China’s chipmaking equipment capabilities, and was worried that this progress would threaten the competitive position of global chipmaking and chip equipment leaders,” said Jing Jie Yu, an equity analyst at Morningstar. “That said, we believe the sell-off today is largely a knee-jerk reaction and overdone.” Yu added that the dominant position of global chip leaders is unlikely to be significantly threatened.
The upcoming earnings reports from major AI investors—including Meta Platforms, Microsoft, and Amazon—could provide further clarity on their spending plans. These companies are set to release their quarterly results later this week.
Despite the outsized influence of AI stocks on the S&P 500, strategists suggest that a rotation into less-loved sectors could be beneficial for the broader market. If other areas continue to rise, the U.S. market may remain resilient even as AI stocks fluctuate.
In the oil market, Brent crude prices fell 4.4% to settle at $82.08 per barrel, easing from last week’s peak of $102. The decline reflected shifting expectations about Middle East tensions and potential negotiations between the U.S. and Iran to ensure safe passage for oil tankers through the Strait of Hormuz.
Lower oil prices contributed to a drop in Treasury yields, with the 10-year Treasury yield falling to 4.60% from 4.65%. A weaker-than-expected reading on U.S. consumer confidence, released by the Conference Board, also weighed on yields.
Traders reduced their bets on a Federal Reserve interest rate hike following its meeting on Wednesday, with the probability of a rate increase falling to 31.5%, down from over 36% the previous day, according to CME Group data. Higher rates could help control inflation but might also slow economic growth by increasing borrowing costs for households and businesses. Long-term mortgage rates have already reached their highest levels in nearly a year, cooling the housing market.
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