AI demand lifts Nasdaq, dollar mixed, oil steady with Gulf risk in view

Technology stocks and bitcoin climbed during Wednesday's session. The dollar lost ground against commodity-linked currencies. Oil prices continued to react to clashing headlines over diplomacy and fresh fighting.

U.S. stocks rose on Wednesday, led by the technology sector. Enthusiasm for artificial intelligence provided a catalyst for buying. The Nasdaq Composite posted the strongest gains among the major indices, and bitcoin also drew demand. Small-cap stocks participated to a lesser extent, and the Treasury market sent conflicting signals.

The Middle East continued to act as the biggest unknown. Optimism about a potential deal vied with fresh worries over combat. Crude oil fluctuated during the day before posting a small drop in the late-afternoon reading. Market participants are still looking for a tangible development that would alter the supply picture.

Foreign-exchange markets showed a mixed dollar, with currencies tied to commodities gaining the most ground.

The greenback gave up the most against the Australian dollar. Its best showing was a slight increase versus the euro.

The Australian dollar rose 0.41% to 0.7031. The New Zealand dollar added 0.30% to 0.5701. Sterling also gained, lifting GBPUSD by 0.10% to 1.3392. These shifts lined up with the upbeat mood in equities and other assets sensitive to risk.

In other currency pairs, EURUSD dipped 0.03% to 1.1233. USDJPY inched 0.02% higher to 158.19. USDCHF dropped 0.04% to 0.8243, and USDCAD eased 0.06% to 1.4045.

In short, the dollar saw some selling, but the activity was narrow rather than widespread.

Treasuries saw short-end yields rise and long-end yields ease.

• The two-year yield stood at 4.8039%, higher by 1.69 basis points.

• The five-year yield stood at 4.9470%, higher by 1.30 basis points.

• The 10-year yield stood at 5.1190%, higher by 0.20 basis points.

• The 30-year yield stood at 5.4122%, lower by 1.28 basis points.

This flattened the yield curve as short-term yields rose and the long bond found buyers. The advance in stocks did not mean the bond market was offering broadly lower borrowing costs.

The Treasury's sale of $13 billion in bonds saw mixed appetite. The pricing involved a give-up, but solid total bidding and direct purchases balanced it. The result was acceptable but not a ringing vote of confidence from buyers.

On U.S. stock markets, technology led the way.

• The Dow industrial average gained 361.06 points, or 0.69%, to 52,862.30.

• The S&P 500 gained 45.15 points, or 0.59%, to 7,757.72.

• The Nasdaq Composite gained 278.04 points, or 1.05%, to 26,702.86.

• The Russell 2000 gained 4.51 points, or 0.16%, to 2,781.03.

• The Nasdaq 100 gained 332.23 points, or 1.13%, to 29,822.52.

The dominance of technology was unmistakable. Small-cap stocks rose, but the modest extent of their gain indicated that excitement was not uniform.

Among the major movers, AI infrastructure names performed strongly while Netflix faced headwinds.

Shares in Super Micro Computer climbed 9.55% to $35.57. The move followed an increase in its preliminary quarterly revenue forecast, driven by higher demand for AI platforms. The company's revised revenue range of $18.5 billion to $19.5 billion was up from the prior $14.5 billion to $15.5 billion. It also raised its gross-margin outlook, offering investors better news on both revenue and profit prospects.

Purchases spread through the broader AI infrastructure category. Dell added 5.27%, Vertiv climbed 4.26%, and GE Vernova gained 4.03%. Software and cybersecurity names also took part: Datadog rose 6.50%, CrowdStrike added 5.26%, and Palantir gained 4.72%.

Netflix headed in the opposite direction, losing 5.31% to close at $65.05. The company's earnings beat was eclipsed by a softer fourth-quarter forecast and a trimmed advertising revenue view. Investors were concentrating on the outlook ahead.

Other notable fallers were AT&T, off 6.45%; Whirlpool, down 5.35%; and Chipotle, lower by 5.26%. Although the main averages were up, significant losses were still present beneath the top line.

After the market closed, several companies released earnings, including Meta, Tesla, IBM, and Lam Research:

• Meta (META) beat expectations on EPS excluding a litigation charge and on revenue. Diluted EPS excluding the charge would have been $7.40 ($3.83 reported plus $3.57), against an expected $6.67. The reported EPS of $3.83 fell short of estimates. Revenue of $64.6 billion came in above the $63.31 billion forecast. Shares gained 4.06% in after-hours trade.

• IBM (IBM) topped projections for operating EPS and revenue. Operating EPS came in at $2.95, above the $2.86 forecast. Revenue of $17.1 billion beat the $16.81 billion estimate. The company confirmed its full-year revenue guidance and increased its full-year free cash flow outlook. Shares rose 4.6% in after-hours trading.

• Lam Research (LRCX) beat on adjusted EPS and revenue. Adjusted EPS of $2.20 exceeded the $2.18 estimate. Revenue of $8.22 billion surpassed the $8.13 billion forecast. Despite the beats, shares fell 6.0% in after-hours trading.

• SAP (SAP) posted revenue and adjusted operating profit that exceeded expectations. Revenue of €10.3 billion was above the €10.1 billion forecast. Adjusted operating profit of €3.0 billion came in higher than the €2.93 billion estimate. The full-year adjusted operating profit guidance of €11.8 billion to €12.2 billion was above the €11.7 billion projected. Shares rose 4.0% in after-hours trading.

• CSX (CSX) beat on EPS and revenue. EPS of $0.57 exceeded the $0.53 estimate. Revenue of $4.02 billion topped the $3.96 billion forecast. Shares were up 4.4% in after-hours trading.

• Tesla (TSLA) beat on adjusted EPS but missed on revenue. Adjusted EPS of $0.48 topped the $0.45 forecast. Revenue of $28.0 billion came in slightly below the $28.1 billion estimate. Shares rose 1.24% in after-hours trading.

• Texas Instruments (TXN) beat on EPS and revenue. EPS of $2.62 exceeded the $2.42 estimate. Revenue of $6.06 billion surpassed the $5.92 billion forecast. The next-quarter revenue guidance of $5.8 billion to $6.3 billion came in above the $5.75 billion projection, even at the bottom of the range. Shares were up 0.65% in after-hours trading.

European equity markets also finished higher, but France remains a worry.

• Germany's DAX rose 342.67 points, or 1.35%, to 25,647.10.

• France's CAC rose 83.19 points, or 1.06%, to 7,921.69.

• The UK's FTSE 100 rose 19.88 points, or 0.19%, to 10,752.87.

• Spain's IBEX rose 231.10 points, or 1.21%, to 19,323.50.

• Italy's FTSE MIB rose 572.32 points, or 1.17%, to 49,643.68.

Hopes for trilateral Russia-Ukraine negotiations were noted as a factor keeping a peace track in view for energy markets, though discussions still require tangible outcomes. France stayed a cautionary case, with its bond yields hitting the highest point since 2002 despite the stock-market gains.

On oil and the Middle East, the underlying risk remains present.

Crude oil stood at $97.59 in the given snapshot, lower by $0.23 or 0.24%. The small net movement hid a further period of sharp swings.

A significant headliner from North America was the news that the State Department was making preparations for ordered departures from US embassies in the Gulf. The cited trigger was potential new hostilities, specifically by Iran-aligned militias in Yemen. This was a report about planning, not a confirmation that departures took place. For crude traders, it underlined the ongoing regional danger.

These worries vied with diplomatic expectations. Earlier reports had described a compromise offer from Qatar and Pakistan, and later pushback against talk of an imminent US-Iran deal. The nuance remains key: talks can trim part of the risk premium in the oil price, but a concrete accord that eases shipping and supply would be far more significant.

The weekly inventories update gave a mixed reading. Crude stocks declined by 3.060 million barrels, compared with a predicted 0.82 million drawdown. Gasoline inventories also fell beyond projections, while distillates posted an unexpected rise. The crude and gasoline declines were supportive, but inventory shifts by themselves do not confirm firmer demand.

Gold and silver showed modest shifts in different directions.

Spot gold added $8.89, or 0.22%, reaching $4,134.35. A weaker dollar against a number of currencies and lower long-dated bond yields offered a degree of backing, though rising short-term yields meant that tailwind was not uniform.

Silver moved $0.115 lower, or 0.20%, to $57.864. Copper also retreated, losing 0.46% to $6.5730. The metals complex was not giving a consistent indication of firmer industrial demand, regardless of the advances in the stock market.

In bitcoin, buyers came back with a willingness to take on risk.

Bitcoin climbed $1,507, or 1.82%, to $84,543. Shares in Strategy added 7.54%, mirroring the firmer mood in crypto-linked trading.

The rise in bitcoin together with technology stocks aligned with a better appetite for risk. During this session, buyers were ready to increase exposure even with the open geopolitical picture.

The coming session takes three questions into its stride. Can the buying linked to AI broaden out? Can diplomatic efforts lead to a tangible improvement in the Middle East? And can Treasury yields soften sufficiently to add more support to the equity recovery? Wednesday delivered progress for buyers. The requirement now is to consolidate.