Wall Street edges lower at the start of a busy week

U.S. stocks edged down from their 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 its 16th winning week in the last 18. The Dow Jones industrial average fell 97.55 points, or 0.2%, 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 following their roar higher 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 of the biggest U.S. stocks in two weeks. Such a 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 midsized 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 AI. It rose 3.6% on Monday to bring its gain for the year to 72.1% after more than tripling in 2023. It was by far the strongest force pushing upward 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 so far appears to be concentrated in just 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, the chair of the Federal Reserve 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 its highest level since 2001, which would relieve pressure on the economy and financial markets.

Fed Chair Jerome H. Powell has already said its next move probably will be a cut, but he’s also said that the Fed needs additional confirmation that inflation is decisively moving down toward its 2% target. That was before reports recently showed 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. Resiliency there has kept the U.S. economy out of a recession, which in turn should drive profits for companies and support stock prices.

Too much strength, though, could keep pressure on inflation. That would force forecasts for the first rate cut even further out on the calendar. Traders have mostly given up on hopes for a rate cut in March. They’re now eyeing June.

In the meantime, several retailers will also offer their latest earnings reports this week. They include Costco Wholesale, Gap and Nordstrom.

Another retailer, Macy’s, jumped 13.5% after two investment firms raised their offer to buy the shares they don’t already own.

Elsewhere on Wall Street, Spirit Airlines lost 10.8%. JetBlue Airways is ending their proposed $3.8-billion combination after a court ruling blocked their merger. JetBlue rose 4.3%.

Apple fell 2.5% after the European Union hit it with a fine of nearly $2 billion for unfairly favoring its own music streaming service over Spotify and other rivals. It was the single heaviest weight on the S&P 500.

Gains were plentiful in other markets. Bitcoin rose above $67,000 to climb closer to its record of nearly $69,000. Gold also rose, setting a record. An ounce for delivery in April settled at $2,126.30.

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

In stock markets abroad, Japan’s Nikkei 225 added 0.5% and topped the 40,000 level for the first time.

Elsewhere in Asia, the spotlight this week is on China’s National People’s Congress, the country’s most important political event. It opens Tuesday and could offer updates on policies to support the slowing economy, resolve troubles in the property market and stabilize financial markets.

Associated Press writers Matt Ott and Zimo Zhong contributed to this report.