FILE – A trader stares at his cell phone outside the New York Stock Exchange in Manhattan's financial district on Wednesday, Sept. 14, 2022 in New York. (AP Photo/Mary Altafer, File)
NEW YORK (AP) — U.S. stocks edged down from record highs on a quiet Monday on Wall Street.
The S&P 500 fell 6.13 points, or 0.1%, to 5,130.95, setting a new all-time high and marking its 16th winning week in the past 18 weeks. The Dow Jones Industrial Average fell 97.55, or 0.2%, to 38,989.83, and the Nasdaq Composite Index fell 67.43, or 0.4%, to 16,207.51.
Momentum in U.S. stocks has slowed on excitement that inflation appears to be calming, interest rates may be cut and the U.S. economy has so far defied recession predictions. At the same time, the frenzy surrounding artificial intelligence technology has sent some stocks soaring to stratospheric heights.
Supermicrocomputers, which sell servers and storage systems used for AI and other computing, rose another 18.6% on Monday. It's up nearly 1,000% in the past 12 months.
This is the first time the stock has been traded since it was announced that it would join the S&P 500 index within two weeks. Such a move could lead to further investment in the company.
The super micro computer will be relegated to the mid-cap S&P 400 index, replacing Whirlpool, which has been in the red for three consecutive years. At the same time, Decker's Outdoor will replace Zion Bancorp in the S&P 500.
The poster child for AI mania is Nvidia, whose chips are driving much of the transition to AI. It rose another 3.6% on Monday, taking its year-to-date rise to 72.1% after more than tripling in 2023. It has become the most powerful force pushing up the S&P 500.
This momentum is fueled by soaring profits and expectations for continued impressive growth. But prices are moving at breathtaking speed, raising concerns about the possibility of another bubble.
Savita Subramanian, an equity strategist at Bank of America, said the market is “intoxicated by AI.” This can be a worrying signal as overexcitement can drive prices up and lead to disappointment later on.
“The bull market ends on a euphoria,” Subramanian said in a report by BofA Global Research. But the excitement so far appears to be focused only on AI and select other areas, as he raised his S&P 500 target for this year's closing price from 5,000 to 5,400.
Several events scheduled for this week could disrupt the market.
The Fed chair is scheduled to testify before a House committee on monetary policy on Wednesday. Wall Street's hope is that inflation has cooled enough for the Federal Reserve to lower its key interest rate from its highest level since 2001, which will ease pressure on the economy and financial markets.
Fed Chairman Jerome Powell has already said the next step will likely be a rate cut, but the Fed needs further confirmation that inflation is falling decisively toward its 2% target. He also said. That was before recent reports showed that inflation at both the consumer and wholesale levels was higher than expected.
Friday's report will outline the state of the U.S. job market, with economists expecting growth to slow after January's strong growth. The region's resilience has kept the U.S. economy out of recession, which should boost corporate profits and support stock prices.
However, if it is too strong, inflationary pressures could persist. If that happens, expectations for the first rate cut will be pushed further out. Traders have already largely given up hope for a rate cut in March. They are now turning their attention to June.
Meanwhile, several retailers are also expected to release their latest earnings reports next week. They include Costco Wholesale, Gap, and Nordstrom.
Macy's, another retailer, soared 13.5% after two investment firms raised offers to buy shares they don't already own.
Elsewhere on Wall Street, Spirit Airlines fell 10.8%. JetBlue Airways has canceled its proposed $3.8 billion merger after a court ruling blocked the merger. JetBlue rose 4.3%.
Apple fell 2.5% after the European Union fined the company nearly $2 billion for unfairly favoring its music streaming service over Spotify and other competitors. This was the heaviest weight in the S&P 500.
Other markets also saw significant gains. Bitcoin has soared above $67,000, close to its all-time high of $69,000. Gold also rose, setting records. One ounce for April delivery settled at $2,126.30.
In the bond market, the yield on the 10-year U.S. Treasury rose to 4.21% from 4.18% late Friday.
In overseas stock markets, Japan's Nikkei Stock Average rose 0.5%, exceeding the 40,000 yen level for the first time.
Elsewhere in Asia, attention this week is on China's most important political event, the National People's Congress. It opens on Tuesday and could provide an update on policies to support the slowing economy, solve problems in the real estate market and stabilize financial markets.
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Associated Press writers Matt Ott and Zimo Zhong contributed.
