Stock market

Yesterday’s market saw a broad decline, with the Nasdaq, Dow, S&P 500, and Russell 2000 all experiencing significant losses amid AI rally fatigue. Disney’s weak revenue and doubts about Oracle’s AI prospects contributed. Expectations for a Fed rate cut diminished. Consumer spending shows mixed signals, while housing faces potential distress. Labor disputes see Boeing workers ratifying a contract, and Starbucks baristas striking. Delivering Alpha insights revealed optimism about AI and concern about the IPO market.

U.S. markets experienced their worst day since October 10th, with the Dow, S&P 500, and Nasdaq all significantly declining. This downturn was driven by cooling AI sentiment, concerns about interest rate policies, and Oracle’s debt-financed AI ambitions. Investors are reassessing tech valuations and the financial commitments required for AI infrastructure. Uncertainty surrounds a potential December interest rate cut by the Fed, coupled with a lack of comprehensive October economic data, further complicating market sentiment. Oracle saw a significant value drop, raising questions about its AI investment sustainability.

The U.S. equity market shows a divergence, with the Dow reaching a record high driven by established industries like banking and healthcare, while the Nasdaq declined due to tech sector sensitivity. Anthropic plans a $50 billion U.S. AI infrastructure investment. Uncertainty surrounds the potential absence of U.S. jobs and inflation data. Private equity firms face challenges with underperforming “zombie companies” difficult to sell.

US equities rose amid optimism for a government shutdown resolution. The Nasdaq saw its biggest gain since May, driven by AI stocks. Bitcoin surged past $105,000. SoftBank reduced its chip sector exposure, focusing on OpenAI. Paramount Skydance announced cost cuts and layoffs. Air travel faced disruptions from the shutdown, and Warren Buffett plans to accelerate charitable giving, preparing Greg Abel for succession at Berkshire Hathaway.

November faced market headwinds despite its historical strength. The S&P 500, Dow, and Nasdaq all declined, with AI stock valuations under scrutiny. Concerns about a potential bubble are rising, echoed by DBS and Goldman Sachs. Conversely, analysts see market pullbacks as buying opportunities, while UBS notes reassuring earnings. China eased rare earth export restrictions and progressed on the Nexperia issue, and the U.S. government shutdown nears resolution. Finally, a global wealth boom is fueling a rise in family office imposters preying on investors.

Despite November’s historical strength for equities, the first trading week saw the S&P 500, Dow, and Nasdaq decline, with the Nasdaq experiencing its largest weekly loss since April. Market anxieties shifted to AI stock valuations and capital concentration in tech giants, sparking correction concerns. Goldman Sachs anticipates a potential equity market drawdown. However, pullbacks are also seen as potential buying opportunities. China’s CPI rose, and the US averted a government shutdown, though the shutdown delayed a crucial jobs report. Oversold stocks and family office imposters were also noted.

Recent equity market pullback, especially in AI stocks, has sparked valuation and contagion concerns. Warnings about a potential market drawdown are increasing. BOE Governor Bailey cautioned about an AI bubble and speculative risks. Despite this, data center construction remains strong, and some see buying opportunities in tech. However, SoftBank’s losses and Michael Burry’s short positions signal waning AI appetite. Strategists suggest caution on US equities, favoring emerging markets benefiting from AI.

November starts with positive market momentum driven by AI optimism and potential US-China trade easing. Key events include Supreme Court hearing on Trump’s tariffs and earnings reports from major companies. Berkshire Hathaway’s cash reserves hit a record $381.6 billion. Big Tech’s ad revenue surpasses expectations with continued AI investments. Emergency funds maintain SNAP benefits amid government shutdown. Eli Lilly and Novo Nordisk face competition in the weight loss drug market. The week is packed with economic data and earnings releases.

October saw unexpected market strength, defying “Octoberphobia” concerns. The S&P 500 rose 2.3% and Nasdaq surged 4.7%, fueled by tech sector growth. Amazon’s cloud-computing success, driven by AI demand, boosted AI-related stocks. Nvidia’s $5 trillion valuation highlights AI’s dominance. Big Tech’s increased capital expenditure on AI infrastructure signals long-term growth potential and a sustained “virtuous cycle” of AI adoption and innovation.

Wall Street saw mixed trading, pressured by Meta and Microsoft’s AI spending concerns despite strong earnings. Honeywell spun off Solstice Advanced Materials (SOLS), receiving an “outperform” rating from BMO. DuPont is set to separate Qnity Electronics (“Q”). Goldman Sachs CEO David Solomon remains confident despite stock performance, citing strong global banking and markets division performance. He sees a low recession risk and AI infrastructure investment as an economic tailwind. Investors await earnings reports from Apple, Amazon, Cloudflare, and Linde.