Stocks pull back ahead of Fed chief ’s testimony

NEW YORK — U.S. stocks edged down from record heights in a quiet Monday on Wall Street.

The Standard & Poor’s 500 index slipped 6.13 points, or 0.1%, to 5,130.95, coming off its latest all-time high and 16th winning week of the last 18.

The Dow Jones industrial average fell 97.55 points, or 0.3%, to 38,989.83, and the Nasdaq composite lost 67.43 points, or 0.4%, to 16,207.51.

Momentum slowed for U.S. stocks after their rise 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 18.6% on Monday. It has surged nearly 1,000% in the last 12 months.

It was the first trading of the stock since an announcement that it will join the S&P 500 index in two weeks. The move could drive even more investment in the company.

Super Micro Computer will replace Whirlpool, which is on track for a third straight losing year and will fall back to the S&P 400 index of midsize stocks. At the same time, Deckers Outdoor will replace Zion Bancorp. in the S&P 500.

The prime example of AI mania is Nvidia, whose chips are powering much of the move into the technology. It rose 3.6% on Monday, bringing its gain for the year to 72.1% after more than tripling in 2023. It was by far the strongest force pushing up 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,” said Savita Subramanian, equity strategist at Bank of America.

That can be a concerning signal, because too much excitement 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 appears to be concentrated in 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, Fed Chair Jerome H. Powell 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 the highest level since 2001, which would relieve pressure on the economy and financial markets.

Powell has already said the central bank’s next move probably will be a cut, but he has also said that the Fed needs additional confirmation that inflation is decisively moving down toward its 2% target. That was before reports recently showed that inflation at both the consumer and wholesale levels was higher than expected.

A report Friday will show how the U.S. job market is doing, with economists forecasting a slowdown from January’s strong growth.

In the bond market, the yield on the 10-year Treasury rose to 4.21% from 4.18% late Friday.