Wall Street experienced a significant downturn with the Nasdaq sinking over 2%, the S&P 500 dropping 1.2%, and the Dow Jones Industrial Average falling 1%. This widespread dip was primarily fueled by renewed concerns about the substantial capital expenditure required for artificial intelligence, particularly after earnings reports from major technology companies. Companies like Alphabet and Tesla saw significant declines, with Alphabet falling 6.9% after increasing its capital spending forecast and Tesla tumbling 15% after reporting lower profits despite strong deliveries, partly due to increased AI and R&D spending.
The market jitters were exacerbated by crude oil prices soaring above $100 a barrel, with Brent crude reaching $100.69. This surge in oil, partly due to escalating US-Iran conflict, intensified inflation fears. Consequently, Treasury yields rose to their highest levels of the year, with the 10-year Treasury note yield climbing to 4.701%. These inflation concerns led traders to reassess the likelihood of a Federal Reserve interest rate hike, with money markets now showing a 35% chance of a hike in the upcoming meeting, up from 10% a week prior.
Despite the overall market decline, a few companies offered contrasting news. Intel Corp. provided a surprisingly strong revenue forecast, and Advanced Micro Devices Inc. announced new data center products aimed at challenging Nvidia. However, even companies like Texas Instruments Inc., which topped sales forecasts, saw their shares fall, indicating that investors were selective, favoring companies showing immediate earnings over those requiring patience for future AI returns. Lockheed Martin Corp. and RTX Corp. raised their full-year sales forecasts due to increased global defense spending, highlighting a sector benefiting from geopolitical tensions.
