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Financial Markets 05/17 15:23
NEW YORK (AP) -- U.S. stocks drifted to a mostly higher close on Wall
Street, marking their fourth winning week in a row. The S&P 500 rose 0.1%
Friday. The Dow Jones Industrial Average rose 0.3% to close above 40,000 points
for the first time. It briefly traded above that level a day earlier. The
Nasdaq composite fell 0.1%. GameStop sank, giving back more of its huge gains
from early in the week, after predicting a loss of up to $37 million for its
latest quarter and announcing that it would sell up to 45 million shares of
stock to raise cash.
THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.
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 fell 0.1% in afternoon trading and remains on track for a fourth
straight week of gains. The Dow Jones Industrial Average was up 45 points, or
0.1%, a day after briefly topping the 40,000 level for the first time. The
Nasdaq composite fell 0.4% as of 2:33 p.m. Eastern time.
Despite the placid movements for indexes, some feverish action was roiling
underneath. Reddit jumped 9.1% 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 23.4% 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 4.42% from
4.38% late Thursday. The two-year yield, which more closely tracks expectations
for the Fed, edged up to 4.82% 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.
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