Wall Street Drifts Ahead of Busy Week

NEW YORK (AP) -- U.S. stocks are drifting around their record heights on Monday.

The S&P 500 was 0.1% lower in morning trading, coming off its latest all-time high set this year and its 16th winning week in the last 18. The Dow Jones Industrial Average was down 60 points, or 0.2%, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 0.3% lower.

Momentum is slowing for U.S. stocks after roaring higher on excitement that inflation appears to be cooling, cuts to interest rates may be coming and the U.S. economy has so far shrugged off predictions for a recession. At the same time, a frenzy around artificial-intelligence technology has catapulted some stocks to stratospheric heights.

Super Micro Computer, which sells server and storage systems used in AI and other computing, jumped another 19.5% Monday. It had already more than tripled in 2024 after more than tripling last year.

It's the first trading for the stock since an announcement that it will join the S&P 500 index of the biggest U.S. stocks in two weeks. Such a move could drive even more investment in the company.

It will replace Whirlpool, which edged up 0.4%. The appliance company is on track for a third straight losing year, and it will fall back to the S&P 400 index of mid-sized stocks. At the same time, Deckers Outdoor will also replace Zion Bancorp. in the S&P 500.

The poster child of AI mania is Nvidia, whose chips are powering much of the move into AI. It rose another 3.6% Monday to bring its gain for the young year so far to 72.2% after more than tripling in 2023. It was the strongest single force pushing upward on the S&P 500.

Such spurts are bolstered by a surge in profits and expectations for tremendous growth to continue. But they are also raising worries about another potential bubble as prices whiz at breathtaking speeds.

The market is "euphoric on AI," according to Savita Subramanian, equity strategist at Bank of America. That can be a concerning signal because too much excitement about stocks can push prices too high, leading to disappointment later.

"Bull markets end with euphoria," Subramanian said in a BofA Global Research report. But the euphoria so far appears to be concentrated in just AI and other select areas, and she raised her target for where the S&P 500 could end this year to 5,400 from 5,000.

Several events scheduled for this week could upset the market.

On Wednesday, the chair of the Federal Reserve will offer testimony before a House of Representatives committee about monetary policy. Wall Street's hope has been that inflation is cooling enough for the Fed to cut its main interest rate from its highest level since 2001. That would relieve pressure that's built on both the economy and financial markets.

Fed Chair Jerome Powell has already said its next move is likely to be a cut, but he's also said the Fed needs additional confirmation inflation is decisively moving down toward its 2% target. That was before a couple reports recently showed inflation at both the consumer and wholesale levels were higher than expected.

A report on Friday will show how the U.S. job market is doing, with economists forecasting a slowdown from January's strong growth. Resiliency there has helped keep the U.S. economy out of recession, which in turn should drive profits for companies and support stock prices.

But too much strength could also keep pressure on inflation. That would force traders to push forecasts for the first cut to rates even further out the calendar. Traders have already mostly given up on earlier hopes for a cut in March. They're now eyeing June as the anticipated beginning.

In the meantime, several retailers will also offer their latest earnings reports this upcoming week. They include Costco Wholesale, Gap and Nordstrom.

Another retailer, Macy's, jumped 15.1% after two investment firms raised their offer to buy the shares they don't already own.

Elsewhere on Wall Street, Spirit Airlines lost 13.7%. It and JetBlue Airways are ending their proposed $3.8 billion combination after a court ruling blocked their merger. JetBlue rose 3.4%.

Apple fell 3% after the European Union hit it with a fine of nearly $2 billion for unfairly favoring its own music streaming service over Spotify and other rivals. It was the single heaviest weight on the S&P 500.

In the bond market, the yield on the 10-year Treasury rose to 4.22% from 4.18% late Friday.

In stock markets abroad, Japan's Nikkei 225 rose 0.5% and topped the 40,000 level for the first time.

Elsewhere in Asia, the spotlight this week is on China's National People's Congress, the country's most important political event. It opens Tuesday and could offer updates on policies to support the slowing economy, resolve troubles in the property market and stabilize financial markets.