U.S. stocks moved higher in Thursday's late trading session, with the Dow Jones Industrial Average gaining over 800 points to set a new record high. Investors rotated from chip stocks into banking and retail shares, while continuing to monitor the latest developments in the Middle East situation.
The Dow rose by 879.27 points, or 1.73%, to close at 51,566.34. The Nasdaq Composite added 51.13 points, or 0.19%, finishing at 26,905.10. The S&P 500 increased by 39.40 points, or 0.52%, ending at 7,593.08.
UnitedHealth Group led the Dow's gains, rising more than 5%. JPMorgan Chase & Co. and Walmart Inc. also contributed to the benchmark's rise, advancing 4% and 1% respectively. Outside the Dow, non-tech stocks like Costco Wholesale Corporation and Eli Lilly and Company gained over 1% and 5% respectively.
Investors observed a trend of capital moving from semiconductor stocks into banking and retail sectors.
This sector rotation was triggered by selling in Broadcom Inc., leading investors to reduce exposure to stocks related to artificial intelligence. The chipmaker's stock fell 14% after reporting second-quarter revenue that missed expectations. Chip stocks, which had previously led the market's rally to record highs, broadly declined. The VanEck Semiconductor ETF (SMH) fell nearly 2%. ARM Holdings plc and Micron Technology, Inc. both dropped more than 5%.
Dennis Folmer, Chief Investment Officer at Montis Financial, stated: "After an amazing earnings season, the AI trade remains alive and well, but after a more than two-month incredible surge, the rally is showing signs of fatigue. Given the deadlock in the Strait of Hormuz shows no end in sight, as the market gradually accepts this reality and takes a breather after the recent consecutive gains, we would not be surprised to see the stock market stall temporarily."
He added that Thursday's movement "indicates the rotation is in its early stages, while also reminding us that not all AI stocks are the same, and the expectations behind each stock vary."
Previously, Wall Street experienced a down day, with stocks pressured by escalating tensions in the Middle East. Attacks escalated between the U.S. and Iran. Iran targeted Kuwait International Airport earlier on Wednesday, while a day earlier, U.S. Central Command stated it had successfully intercepted multiple Iranian ballistic missiles and drones and conducted a "defensive strike" on Qeshm Island in the Persian Gulf. U.S. officials said this was in response to Tehran's "attempt to launch an attack."
On the economic data front Thursday, the U.S. Department of Labor reported that for the week ending May 30, initial jobless claims totaled 225,000, an increase of 13,000 from the previous week and higher than the Dow Jones consensus estimate of 215,000. This figure marked the highest level of claims since the week of February 7.
Data from the U.S. Bureau of Labor Statistics showed first-quarter productivity rose 0.3%, below the expected 0.5%; while unit labor costs increased 1.8%, below the expected 2.4%.
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