US Stocks Rise Back Towards Records As AI Companies Report Strong Profits

U.S. Stocks moved higher Wednesday as several artificial-intelligence companies reported stronger-than-expected growth in the spring quarter, while inflation data showed a modest improvement. The S&P 500 rose 0.5% early in the session and was on pace for its first gain since reaching an all-time high on Friday. The Dow Jones Industrial Average added 91 points, and the Nasdaq composite climbed 0.8%.

AI-focused stocks led gains after strong earnings reports reinforced investor confidence that these companies can sustain the substantial growth needed to support their recent valuations. CoreWeave's shares surged more than 18% and Super Micro Computer jumped nearly 9% in pre-market trading on solid quarterly results. CoreWeave more than doubled its revenue as customer demand accelerated in the second quarter. Other companies involved in building artificial intelligence data center infrastructure, including Coherent Corp., Lumentum Holdings and Marvell Technology, also gained.

Futures pointed to further strength before inflation data for July. S&P 500 futures gained 0.3%, Dow futures edged up 0.1%, and Nasdaq futures rose 0.7%. Economists expected the data to show inflation slipped to 3.4% in July from 3.5% in June. Cooler inflation could ease pressure on the Federal Reserve to raise interest rates, which when increased make borrowing costlier for households and businesses while potentially dragging on stock prices.

Oil prices remained largely flat Wednesday but rose sharply during the week as fighting in Iran closed the Strait of Hormuz, through which a fifth of global oil supply passes. Brent crude rose 0.19% to $89.08, while U.S. Benchmark crude ticked up 0.4% to $83.53. National average gasoline prices edged 2 cents higher to $4.04 per gallon, 16 cents higher than a month prior. An attack by Iran-backed Houthi rebels on a vessel in the Bab el-Mandeb strait raised concerns about further regional shipping disruptions. "The renewed hostilities between the US and Iran suggest that a long-term reduction in shipping through the Strait of Hormuz is now the most likely scenario," Ben May, director of global macro research at Oxford Economics, said.

Treasury yields jumped due to higher oil prices and inflation concerns, sending long-term mortgage rates to their highest levels in a year. In early European trading, Germany's DAX rose 0.47% to 26,514.56, while Paris's CAC 40 fell 0.12% to 8,705.08. Asian trading was mixed. The dollar slipped to 159.16 Japanese yen from 159.22 yen, while the euro declined slightly to $1.1537.