Stocks Fall as AI Rout Spurs Flight to Bonds: Markets Wrap
(Bloomberg) — Global equities fell as a selloff in the artificial-intelligence trade gathered speed and pushed investors toward the safety of bonds.
S&P 500 futures were down 0.2% while Nasdaq 100 contracts retreated 1.1%. Thursday’s leg lower came as Anthropic PBC disclosed $16.8 billion in third-quarter revenue to prospective investors, figures that suggested the pace of growth had slowed even as growth remained robust.
An exchange-traded fund tracking chipmakers fell 2.5% in US premarket trading, signaling that the sector’s six-day selloff was set to carry on. Consumer names outperformed. CoreWeave Inc. fell a further 3.3% after Wednesday’s 15% rout when its bonds also dropped to levels that typically show distress.
The sharp retreat in chip stocks made bond yields near their highest levels in decades look increasingly attractive. Treasuries extended gains, with 10-year yields declining nine basis points to 5.09%, the lowest level in three weeks. Haven demand also lifted the Swiss franc, while the dollar dropped 0.3%. Brent crude fell below $105 a barrel.
“The market is juggling a number of risks at the moment, notably geopolitical, which is fueling oil prices and in turn inflation and monetary policy,” said Roland Kaloyan at Societe Generale. Some investors “are looking to take profits and rotate out of the semiconductor trade. With yields where they are today, bonds are becoming increasingly attractive.”
Equities are under pressure as investors question whether billions poured into AI will deliver sufficient returns. At the same time, stubborn US inflation is raising the prospect of more aggressive central-bank tightening and higher financing costs.
While Anthropic’s figures still pointed to spectacular growth, the loss of momentum is undercutting sentiment among investors accustomed to “parabolic” figures, noted Adam Crisafulli at Vital Knowledge.
“The fact investors are turning less hospitable to the industry will inevitably have implications for capex,” he said.
Elsewhere, Asian stock markets bore the brunt of Thursday’s selling. South Korea’s Kospi index tumbled 7.6% while chip heavyweights Samsung Electronics Co. and SK Hynix Inc. both sank more than 9%. Taiwan Semiconductor Manufacturing Co. lost 2% before reporting profit that beat estimates but margins that fell short.
Producer price data on Thursday will give investors another reading on the state of inflation after Wednesday’s stronger-than-expected consumer price figures initially prompted traders to sharply increase bets on further Federal Reserve interest-rate hikes.
Bloomberg Economics expects the monthly headline and core readings to have firmed in September. However, PPI components that feed into the Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, appear likely to add only limited pressure to the month’s print.
The focus on inflation will also heighten scrutiny of Fed Chairman Kevin Warsh’s remarks on Friday in Bangkok, where he is scheduled to appear in a fireside chat with International Monetary Fund Managing Director Kristalina Georgieva.
“The global story is about inflation being above target, triggered by energy prices and hawkish central banks,” said Vasiliki Pachatouridi, head of iShares fixed income product strategy EMEA at BlackRock. “That doesn’t change what we continue to see from investors, which is an accelerating interest in fixed income for the income.”
What Bloomberg Strategists Say…
“The bond reaction represents a classic tactical rally, and today’s price action isn’t a sign of how they will evolve. Stocks are selling off, as they should. But we aren’t in an environment that warrants piling into nominal bonds when inflation is as high.”
— Ven Ram, cross-asset strategist. Click here for more.
Corporate News:
Taiwan Semiconductor Manufacturing Co. reported a better-than-expected profit for the September quarter, sustaining torrid growth despite rising concern about the long-term AI buildout. Anthropic PBC told prospective investors its third-quarter revenue hit $16.8 billion, according to people familiar with the matter, as the artificial intelligence company pushes ahead with plans to go public. Ericsson AB shares jumped the most since January after its third-quarter earnings beat analysts’ expectations, driven by solid demand for mobile network equipment in its core markets. Bank of New York Mellon Corp. posted profit that beat estimates as the firm got a boost from higher rates. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.2% as of 7:43 a.m. New York time Nasdaq 100 futures fell 1.1% Futures on the Dow Jones Industrial Average rose 0.3% The Stoxx Europe 600 fell 0.1% The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.5% to $1.1214 The British pound rose 0.5% to $1.3258 The Japanese yen rose 0.3% to 157.92 per dollar Cryptocurrencies
Bitcoin fell 0.9% to $80,991.51 Ether fell 2.1% to $2,364.08 Bonds
The yield on 10-year Treasuries declined nine basis points to 5.09% Germany’s 10-year yield declined nine basis points to 3.38% Britain’s 10-year yield declined eight basis points to 5.34% Commodities
West Texas Intermediate crude rose 0.3% to $95.33 a barrel Spot gold rose 1.1% to $4,150.55 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Subrat Patnaik, Alice Atkins and Julien Ponthus.
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