Volkswacht Bodensee - Wall Street's AI-fuelled rally falters

Wall Street has been on a tear over the past week, with the S&P 500 setting a record high in the wake of US president Donald Trump's massive AI-investment announcement.

But both the S&P 500 and tech-heavy Nasdaq Composite fell at the start of trading Thursday.

"There is some natural hesitation today given how far the market has come in just seven trading sessions and tariff uncertainty lurking in the background," said Briefing.com analyst Patrick O'Hare.

Furthermore the yield on 10-year Treasuries edged up on Thursday.

Higher borrowing costs means that companies, particularly tech firms, see their earnings compressed, and as a consequence their stock prices high compared to their earnings.

"The stretched earnings multiple is a headwind running into an earnings reporting period that has high expectations going into next week's results from the likes of Microsoft, Meta Platforms, Tesla and Apple," O'Hare said.

Investors have largely welcomed the first few days of Trump 2.0 as he held off immediately returning to the hardball trade policies of his first term.

However, warnings that China, the European Union, Canada and Mexico could be hit by tariffs as soon as February 1 have given cause for concern.

"Investors are still weighing Trump's tariff talk, though history suggests his bark often echoes louder than his bite," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Trading in Asia got a lift from Wednesday's Wall Street rally that saw tech titans including Nvidia, Microsoft and ARM surge after Trump announced a new $500 billion venture to build infrastructure for artificial intelligence in the United States.

Tokyo-listed SoftBank, named in the venture, extended the rally Thursday, piling on more than five percent and boosting Tokyo's gains.

Elsewhere, Chinese authorities unveiled measures to bolster the country's stock markets, including allowing pension funds to invest in listed companies and pushing firms to increase share purchases.

The measures provided some support with Shanghai's stock market advancing, but Hong Kong gave up early gains to end lower.

"Recent history would suggest Beijing will need to take more radical action if Chinese shares are to enjoy a sustained recovery," said AJ Bell investment director Russ Mould.

The yen edged up against the dollar ahead of the Bank of Japan's policy decision Friday, when many investors expect it to raise interest rates for the third time since March.

"Economic data continues to support the BoJ's case for a rate hike," said Gregor Hirt at Allianz Global Investors, pointing to upward momentum in core consumer prices.

In European equity trading, Frankfurt set a new record high and London was just shy its all-time high. Paris also rose.

- Key figures around 1430 GMT -

New York - Dow: UP less than 0.1 percent at 44,181.03 points

New York - S&P 500: DOWN 0.1 percent at 6,077.70

New York - Nasdaq Composite: DOWN 0.5 percent at 19,909.85

London - FTSE 100: UP 0.1 percent at 8,557.47

Paris - CAC 40: UP 0.5 percent at 7,876.75

Frankfurt - DAX: UP 0.4 percent at 21,328.51

Tokyo - Nikkei 225: UP 0.8 percent at 39,958.87 (close)

Hong Kong - Hang Seng Index: DOWN 0.4 percent at 19,700.56 (close)

Shanghai - Composite: UP 0.5 percent at 3,230.16 (close)

Euro/dollar: DOWN at $1.0414 from $1.0425 on Wednesday

Pound/dollar: UP at $1.2324 from $1.2313

Dollar/yen: DOWN at 156.36 yen from 156.45 yen

Euro/pound: UP at 84.53 pence from 84.48 pence

West Texas Intermediate: UP less than 0.1 percent at $75.48 per barrel

Brent North Sea Crude: UP 0.1 percent at $79.09 per barrel

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I.Stoeckli--VB