US Stock Market Struggling While Microsoft Jumps and Alphabet Stumbles in Battle of AI Giants
The major U.S. stock indexes are edging lower shortly after the cash market opening on Wednesday as investors fretted over the chances of several more rate hikes this year by the U.S. Federal Reserve. Meanwhile, Microsoft is bucking the trend with a small gain after revealing its AI plans.
At 15:30 GMT, the blue chip Dow Jones Industrial Average is trading 34066.38, down 90.31 or -0.26%. The benchmark S&P 500 Index is at 4132.75, down 31.25 or -0.75% and the tech-driven NASDAQ Composite is trading 11972.60, down 141.18 or -1.17%.
Powell Rally Stalls
Stocks rallied on Tuesday after investors once again interpreted comments from Fed Chairman Jerome Powell as less-hawkish than expected. However, after digesting his remarks overnight, investors aren’t as bullish today.
Powell actually didn’t offer anything new on Tuesday. He mentioned disinflation, which is potentially bullish, but he also said that interest rates will continue to rise.
The price action the past two days suggests that investors have grown numb to Fed comments and have decided to let the economic data dictate whether the Fed will continue to lift rates or if policymakers will pause at either the March or June meeting.
Furthermore, it looks as if the market is pricing in the possibility of a terminal rate of 5.00% – 5.25%. Anything higher than that will be bearish for the market. Anything lower will be bullish.
Microsoft’s Gain is Alphabet’s Loss
Alphabet shares tumbled more than 8% Wednesday, less than a day after new AI tools announced by Microsoft boosted Wall Street’s confidence in search engine Bing’s ability to take share from Google.
On Wednesday, Alphabet held its own event, geared toward its new artificial intelligence chatbot known as Bard.
The events from the competing technology giants come as the race to build the next big artificial intelligence innovation heats up in the wake of ChatGPT’s show stopping launch.
Microsoft looks like the early winner with its stock up over 1.5% on Wednesday.
Wells Fargo’s analyst Michael Turrin said in a note on Tuesday that the AI-powered updates “will help drive share gains in search, browser & advertising and support AI-enabled innovation across MSFT’s product portfolio.”
Meanwhile, in a note to clients Tuesday, JPMorgan’s Mark Murphy said that Microsoft is beginning to “harvest years of prescient AI investments.” This should position the company to take share, specifically within the advertising market.
“In summary, we continue to see Microsoft as the best house in a temporarily deteriorating neighborhood, while the fundamental trends of modernization and automation remain intact long-term,” he wrote.