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(AWP Alliance News) - Shares ended higher in New York on Thursday despite a sell off in artificial intelligence stocks and hotter than expected US producer price inflation.
The Dow Jones Industrial Average closed up 556.21 points, 1.1%, at 52,177.69. The S&P 500 rose 25.12 points, 0.3%, to 7,744.06. The Nasdaq Composite ended up 20.16 points, 0.1%, at 26,713.03.
The yield on the 10-year US Treasury was at 5.10% late Thursday, down from 5.19% on Wednesday. The 30-year yield fell to 5.43% from 5.52%.
Against the dollar, the euro was at USD1.1216, up from USD1.1156. on Tuesday. Sterling climbed to USD1.3276 from USD1.3190. Against the yen, the dollar was at JPY158.08, down from JPY158.29.
"Concerns over investments linked to artificial intelligence boosted demand for government bonds. This move temporarily reduced the dollar's relative appeal and allowed the European currency to regain ground," said XS.com Senior Market Analyst Antonio Di Giacomo.
"However, declining yields do not necessarily mean that inflationary pressures are easing. The US Producer Price Index rose 1.3% month over month in September, compared with expectations of 0.5%, while the annual increase reached 6.3%. The size of the increase points to greater pressure on business costs and raises the risk that some of those increases will eventually be passed on to consumers," Di Giacomo added.
"Adding to this backdrop is annual consumer inflation of 3.7%, which keeps the debate over the need for further Federal Reserve action alive. Rising consumer prices and higher production costs make it difficult to anticipate a rapid easing of inflation. For the currency market, this means that dollar weakness could be limited if upcoming indicators reinforce expectations that interest rates will remain elevated for longer."
US producer prices rose at their fastest monthly pace in more than four years in September, significantly exceeding market expectations, the US Bureau of Labor Statistics said Thursday.
On an annual basis, producer prices rose 6.3% in September, accelerating from 5.4% in August and exceeding the FXStreet-cited consensus of 5.3%. This was the strongest annual increase since December 2022.
The BLS said prices for final demand goods jumped 2.6% in September, the largest increase since the series began in December 2009.
More than 80% of the increase was attributable to energy prices, which surged 11%. Gasoline prices alone jumped 20%, accounting for half of the overall increase in goods prices.
CoreWeave saw a measure of its credit risk climb to an all-time high on Thursday, Bloomberg noted, underscoring investor concerns over corporate debt in the AI space.
"Debt investors are freaked out about CoreWeave's cost of equity and equity investors are freaked out about its cost of debt," said Franklin Templeton Fixed Income portfolio manager Bill Zox told Bloomberg.
The cost of protecting CoreWeave's debt against default for five years rose by as much as 74.5 basis points to 1,194.5 basis points, according to a Bloomber-cited ICE Data Services report. This marks the highest intraday level on record with swaps pricing in a more than 60% chance of default within the next five years, the outlet noted.
Additionally, CoreWeave's 2031 9% notes fell by roughly 0.5 cents on the dollar to 82.75 cents on Thursday afternoon, pushing the yield to 14.5%, according to the the Trade Reporting and Compliance Engine. However, its 9.75% notes due 2031 rose 2.25 cents to 87.75 cents.
Meanwhile, debt due 2032, which which investors bought at par four months ago, was quoted at about 78 cents on the dollar Wednesday. To which, SpaceX and Tesla CEO responded "yikes" in a post on X.
CoreWeave ended up 5.9%, however as the cloud computing firm received the support of Nvidia Chief Executive Jensen Huang. Nvidia holds around 10.29% of the company.
"CoreWeave' strength is improving every day," Huang told Bloomberg at an event Thursday in Stockholm. "I'm optimistic. Their cost of capital is actually decreasing."
Nvidia closed down 1.8%. Peers AMD, Broadcom dropped 1.5% and 0.6%, respectively. SpaceX fell 2.3% and Tesla dropped 1.3%.
Seagate shed 3.2% and Western Digital dropped 2.1%. SK Hynix ended down 1.0% in New York. Micron jumped 1.9% however. Musk praised the company in an X post late Tuesday.
"Micron has been reasonable regarding future memory prices, while others have been extortionate, which is something today's customers won't forget...Micron is making is the smart move for long-term customer loyalty," Musk wrote.
A barrel of Brent fetched USD105.77 late Thursday, down from USD106.10 on Wednesday. West Texas Intermediate rose to USD97.70 from USD95.18.
The Houthis launched a deadly missile attack Thursday on the presidential palace in the Yemeni government's interim capital of Aden, as Saudi Arabia blamed Iran for the recent dramatic escalation in the long-running war.
"Iran continues to arm, train and support the Houthi militia in violation of UN security council resolutions," Saudi deputy minister for public diplomacy Rayed Krimly.
"We think that the escalation by the Houthis at this latest stage of the conflict is encouraged by Iran," he added.
Gold climbed to USD4,169.17 an ounce from USD4,101.18.
In Europe, the FTSE 100 closed up 1.1% in London. The DAX 40 in Frankfurt gained 0.3%. The CAC 40 rose 0.8% in Paris.
In China, the Shanghai Composite Index fell 1.6%. The Hang Seng Index in Hong Kong closed down 1.0%. The Nikkei 225 in Tokyo shed 4.9%. The S&P/ASX 200 ended down 0.1% in Sydney.
Friday's global economic calendar has US industrial production, alongside eurozone CPI and trade balance data.
By Aidan Lane, Alliance News reporter
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