Wall Street Chips Recover as Markets Watch AI Debt and Interest Rates
Global markets experienced mixed trading as Wall Street chip stocks rebounded while Asian exchanges dropped. Meanwhile, Meitav's chief economist warned of widening sector gaps reminiscent of the dot-com era.
Global markets displayed mixed sentiment as Wall Street opened the week with varied indices, while Asian stock exchanges faced widespread downward pressure amid ongoing concerns over artificial intelligence sector debt and slowing momentum.
Wall Street Mixed and Chip Stocks Recovery
Wall Street concluded the first trading day of the week with mixed movements. The Nasdaq index recovered slightly from its late-week drop, climbing approximately 1.1%; the S&P 500 advanced by about 0.4%; and the Dow Jones recorded a minor decline of roughly 0.1%. The SOXX exchange-traded fund, which tracks semiconductor stocks, rose by over 2% after shedding more than 10% the previous week due to growing worries surrounding the heavy debt loads assumed by AI-related firms. This halted a nine-day losing streak for chip stocks, the longest recorded since 2006. Notable performers included Nvidia, Advanced Micro Devices (AMD), Micron Technology, and Marvell Technology.
Cloud computing firm CoreWeave, which stood at the center of AI sector anxieties last week, continued its negative momentum, slipping 0.4% after its market value was slashed by a quarter last week and the yield on its 2031 bonds surged to an extraordinary 15%. Out of the 11 sectors in the S&P 500, seven finished the day in negative territory. The Consumer Discretionary sector led the gains with a 2.7% jump, driven largely by Amazon and Tesla, which are often aligned more closely with technology.
Tel Aviv Market and Corporate Developments
Despite positive closes in parts of Wall Street, dual-listed shares returned to Tel Aviv with a negative arbitrage gap of roughly 0.3%. Dual-listed chip stocks Nova (down 2.5%), Tower Semiconductor (down 1.1%), and Camtek (down 1.8%) led the losses. Meanwhile, the Tel Aviv Stock Exchange closed on a negative note previously, with the Tel Angeles and TA-35 indices dropping 0.5% and TA-90 slipping 0.3%.
In corporate news, Elbit Systems announced securing a strategic contract valued at $235 million to supply medium-range rockets and PULS artillery rocket systems to a European customer over a three-year period. Additionally, Veridis signed an agreement to sell 40% of the operating rights for the Ashkelon desalination plant to the Baran Group for approximately 54 million NIS in cash. The Bank of Israel is widely expected to keep its interest rate unchanged at 3.25%.
Echoes of the Dot-Com Era
Alex Zgezinsky, Chief Economist at Meitav Investment House, pointed out in his weekly review that the widening performance gaps between the technology sector and other S&P 500 sectors have reached levels not seen in recent years, drawing comparisons to the period preceding the dot-com bubble burst in the early 2000s. Under the headline "Greetings from the Dot-Com Era," Zgezinsky noted that the 26-week rolling correlation between weekly changes in the S&P 500 IT index and the S&P 500 ex-IT index has dropped to zero.
"In normal conditions, most sectors move in the same direction influenced by shared factors such as interest rates, economic growth, and investor risk appetite. Negative or zero correlation may indicate that the technology sector is disconnecting from these fundamentals and operating according to its own internal logic, with investors pricing it primarily on future expectations rather than current economic realities," Zgezinsky explained.
