Key points
S&P 500 ▼ 93.74 points (1.2%) to 7,663.43
Dow Jones ▲ 11.89 points to 52,867.98
Nasdaq ▼ 694.00 points (2.6%) to 26,008.86
The S&P 500 dropped 1.2 per cent, marking its worst session since July, while the Nasdaq composite slid 2.6 per cent. The intense selling pressure on tech stocks was significant enough to overshadow gains elsewhere in the US market, where the majority of individual stocks actually finished higher. The Dow Jones Industrial Average managed a modest gain of 11 points, or less than 0.1 per cent.
Why strong results weren’t enough for AI stocks
AI-focused stocks have experienced volatility amid concerns that their momentum could be hampered by the rising costs of borrowing capital to fund data centers and acquire advanced AI chips. Investors also remain wary that valuations may have climbed too high following a multi-year rally, even as companies within the sector continue to post growth.
Meta Platforms, the developer of the Muse AI agent, saw its shares fall 7 per cent after reporting quarterly revenue that beat analyst expectations, despite missing profit targets. The parent company of Facebook and Instagram also announced plans to issue a new class of stock to help finance AI-related Wall Street, fluctuations in Nvidia’s share price exert more influence on the S&P 500 than any other stock, making it the primary factor behind the index’s decline.
The selling started in Asia
The downward trend for AI and tech shares originated in Asia, where regional indexes are heavily weighted toward industry participants. South Korea’s Kospi fell 3.5 per cent, Hong Kong’s Hang Seng dropped 3 per cent, and Japan’s Nikkei 225 declined 2.7 per cent.
Oil hits a five-month high
A surge in oil prices also acted as a drag on global equity markets.
Brent crude oil prices jumped 4 per cent to US$113.17, reaching their highest level in five months. Prices have climbed from under US$97 at the beginning of the month due to uncertainty regarding when the conflict with Iran will allow global energy markets to stabilize.
Government debt worries rattle bond markets
In Europe, France’s CAC 40 index suffered one of the region’s most significant declines, falling 1.4 per cent. While the index contains fewer tech stocks than its US or Asian counterparts, it was negatively impacted by a spike in French government bond yields.
Yields in the region have trended upward due to concerns regarding the government’s substantial debt burden and fiscal strain. Ongoing protests across France have increased pressure on the government to boost spending, which threatens to further expand the national debt.
Anxiety surrounding high levels of government debt is affecting nearly every developed economy, including the United States. These concerns, combined with persistent <a s decline in yields occurred even as new data suggested the US economy may be performing better than economists anticipated. The report indicated that fewer Americans filed for unemployment benefits last week, potentially signaling that layoffs remain at low levels nationwide.
Most stocks rose, but tech drowned them out
A robust economy has helped US corporations achieve higher profits, which drove the US stock market to record highs earlier this month despite various headwinds. Two out of every three stocks in the S&P 500 finished the day higher, only to be eclipsed by the losses among influential tech giants.
In total, the S&P 500 fell 93.74 points to 7,663.43. The Dow Jones Industrial Average gained 11.89 points to 52,867.98, and the Nasdaq composite dropped 694.00 points to 26,008.86.
