New York Stocks Fluctuate Early as Market Attempts Rebound Amid Mixed Optimism and Caution Over 'AI Rally'

Alibaba Announces Expansion of AI Infrastructure Spending
Caution Rises After Powell Says "Stock Prices Are Significantly Overvalued"
Focus on August PCE Price Index to Be Released on the 26th

The three major indices on the New York Stock Exchange were moving sideways on September 24 (local time). After falling the previous day due to doubts about the sustainability of the artificial intelligence (AI) rally and comments from Jerome Powell, Chair of the Federal Reserve, regarding stock overvaluation, the market is now fluctuating as it attempts a rebound.

As of 10:05 a.m. on the New York Stock Exchange, the blue-chip Dow Jones Industrial Average was up 57.32 points (0.12%) at 46,350.1. The large-cap S&P 500 Index rose 1.72 points (0.03%) to 6,658.64, while the tech-heavy Nasdaq Index was up 11.67 points (0.05%) at 22,585.143.

Previously, on September 22, optimism about AI spread following news that Nvidia would invest 100 billion dollars in OpenAI. However, the previous day saw a wave of skepticism, leading to a weak close for the stock market. Subsequently, Chinese big tech company Alibaba announced plans to expand its AI infrastructure spending and to cooperate with Nvidia, reviving expectations for the sustainability of the AI boom, which had briefly lost momentum.

Opinions in the market are divided on whether the AI rally can continue in the long term.

Kwon Ohsung, Chief Equity Strategist at Wells Fargo, stated, "This is not a bubble," adding, "The bull market led by AI is likely to continue." He explained, "The reason the Nasdaq Index has generally outperformed the S&P 500 Index since the tech bubble burst is because its fundamentals have been stronger, and this trend will persist. Also, we are still in the early stages of the AI investment cycle."

However, as Chair Powell mentioned that "stock prices are significantly overvalued," there are growing concerns about profit-taking and heightened caution regarding further rallies.

The market is also focused on economic indicators to be released this week. The core indicator is the Personal Consumption Expenditures (PCE) price index for August, which will be released on September 26. The core PCE price index, which the Fed considers the most important inflation gauge, is expected to rise 0.2% month-on-month, slowing from July's 0.3%. On September 17, the Fed lowered its benchmark interest rate by 0.25 percentage points to a range of 4.0% to 4.25%. The future path of interest rates is expected to depend on inflation and employment data.

U.S. Treasury yields are rising. The yield on the 10-year U.S. Treasury note, the global benchmark for bond yields, was up 1 basis point (1bp = 0.01 percentage point) from the previous session at 4.13%. The yield on the 2-year U.S. Treasury note, which is sensitive to monetary policy, also rose 1 basis point to 3.58%.

By stock, Nvidia was up 0.18%. Amazon was showing a strong gain of 0.82% after Wells Fargo raised its investment rating to overweight. Tesla was up 2.15%. Despite issuing a better-than-expected earnings outlook, Micron was down 2.67%. Oracle, which is planning to issue 15 billion dollars in corporate bonds, was down 2.53%.