Stocks Fall as AI Jitters Ease Bets on Fed Hikes: Markets Wrap
(Bloomberg) — Wall Street shunned stocks as a technology rout and Middle East risks drove investors to the safety of bonds, reducing bets on another Federal Reserve rate hike in 2026.
A nearly 7% plunge in chipmakers sent the Nasdaq 100 to its worst day since June. That was after Meta Platforms Inc.’s plans to boost capital spending reignited fears that tech firms will issue more debt to finance the artificial-intelligence buildout. The S&P 500 fell 1.2%. An oil rally also weighed on sentiment amid heightened supply fears.
The rush for shelter spurred the biggest jump in Treasuries in over a year, outweighing worries about energy-fueled inflation. In fact, money markets are no longer fully pricing in a Fed rate increase by the end of the year.
“The correction in tech valuations prompted investors to reconsider whether a market-induced tightening of financial conditions could warrant a less restrictive course of monetary policy,” said Ian Lyngen at BMO Capital Markets.
Following an extraordinary run in tech stocks, markets are becoming more demanding around evidence of the payoff from AI investments and worries about the sustainability of that spending amid higher rates, according to James McCann at Edward Jones.
“We remain constructive on large-cap stocks,” he said. “However, investors should look to ensure that they have good diversification in portfolios.”
Meta’s results kicked off a technology earnings season that’s likely to focus on runaway AI expenditures — and attempts by companies to get a return on investment. Alphabet Inc., Microsoft Corp. and Amazon.com Inc., three of the other biggest spenders on data centers, are slated to report next week.
Blackstone Inc. President Jon Gray said investors don’t need to worry that the boom in AI will turn into a bubble, just days after billionaire Ken Griffin said he fears the industry was “almost certainly” headed in that direction.
“When you think about a bubble, you think about building capacity and then hoping the demand comes,” Gray told Bloomberg Television after the firm reported its third-quarter results. “With AI, you’re building capacity, and you’re hoping you can keep up with the demand.”
Elsewhere, Chinese stocks were dragged into a bear market, with $2.4 trillion lost since a peak in May, as a protracted slump in consumption and mounting doubts over the profitability of AI companies turn them into one of the world’s worst performers.
Meantime, French bond stress deepened as spreads widened to a 15-year high, with a broad flight from risk and the threat of another weekend of protests reinforcing the country’s status as the weak link in global markets.
Corporate Highlights:
Moderna Inc. and Merck & Co. fell after data on the companies’ widely anticipated personalized melanoma vaccine wasn’t enough to prove to investors that a new era of cancer treatments has arrived. Bill Ackman called on the Trump administration to release Fannie Mae and Freddie Mac from conservatorship, warning that a Democrat-controlled government could weaponize the entities against Republicans. Procter & Gamble Co.’s sales and profits beat Wall Street expectations, showing the Tide-owner’s limited price hikes that are successfully drawing constrained customers have not come at the expense of earnings. Lockheed Martin Corp. lifted its full-year outlook as the company’s missile systems portfolio was buoyed by rising global defense spending. Some of the main moves in markets:
Stocks
The S&P 500 fell 1.2% as of 4 p.m. New York time The Nasdaq 100 fell 2.9% The Dow Jones Industrial Average was little changed The MSCI World Index fell 1.1% Currencies
The Bloomberg Dollar Spot Index was little changed The euro fell 0.2% to $1.1214 The British pound was little changed at $1.3395 The Japanese yen rose 0.8% to 156.88 per dollar Cryptocurrencies
Bitcoin fell 3.9% to $81,350.15 Ether fell 4.3% to $2,383.04 Bonds
The yield on 10-year Treasuries declined 15 basis points to 4.97% Germany’s 10-year yield declined nine basis points to 3.33% Britain’s 10-year yield declined five basis points to 5.33% Commodities
West Texas Intermediate crude rose 2.2% to $99.29 a barrel Spot gold fell 2.8% to $4,025.40 an ounce ©2026 Bloomberg L.P.
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