Feeling Fragile. One report. Apparently, that's all it takes to disrupt the AI trade.
The Financial Times reported on Thursday that OpenAI's annualized recurring revenue was $20 billion lower than previously signaled. While OpenAI hasn't confirmed the figure, markets still moved on the fear that it might be true. The anxiety centers on whether OpenAI's model could be falling behind its competitors.
The tech-heavy Nasdaq Composite lost 1.3% on Thursday, marking its worst single-day performance since mid-August, while the S&P 500 fell 0.5%. Chips were a bid drag: the PHLX Semiconductor Index was down 3.4%.
It wouldn't have been such a bad day for stocks if it weren't for the tech selloff. The ProShares S&P 500 Ex-Technology ETF was up on the day, gaining 0.5%, and six of the S&P's 11 categories closed in the black.
The Dow Jones Industrial Average rose 0.1%, thanks to its price-weighted structure. Gains from companies like Travelers Company, Home Depot, and Visa helped offset losses from AI plays like Nvidia.
The Dow's gains came even as oil prices surged again. A deadly attack on a tanker in the Persian Gulf pushed oil prices to their highest levels in weeks on Thursday. Comments from President Donald Trump that the U.S. would not be attacking Iran "at any time prior to the Midterm Elections" helped assuage some investor fears, but Brent crude futures still hovered just below the $104 mark by the end of the trading day.
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The Hot Stock: CoStar Group, Inc. +8% The Biggest Loser: Coherent Corp -9.6%
Best Sector: Energy +2.9% Worst Sector: Information Technology -1.8%
Will France's Debt Woes Spark a Massive Crisis Across the EU?
The situation isn't that dire yet, but France is in a tight spot. France's public debt has grown to 120% of its GDP, and with sovereign yields rising, servicing that debt is getting dangerously expensive. Bondholders are pressuring the government to slash spending, but protesters are calling for more social programs.
This puts France in a bind ahead of its presidential elections next spring. The government will likely have to offer some concessions to protesters in the short term, which could keep its debt in a financially precarious condition. French Prime Minister Sébastien Lecornu said the government would unveil its policy response later this month. That means the current bond rout could fester for a while, writes my colleague, Reshma Kapadia.
Investors are looking closely for signs that France's fiscal mess is spreading to other countries in the Eurozone, such as investors pulling capital out of the country, or worrisomely weak demand during auctions for French government bonds. That hasn't happened yet, and experts say the European Central Bank could step in to help other countries vulnerable to contagion.
Read Reshma's full story here.
The Calendar
Delta Air Lines reports earnings tomorrow.
The University of Michigan releases its Consumer Sentiment index for October. Economists forecast a 48 reading, slightly higher than September's 47.8 reading. Consumer sentiment remains in the doldrums, with the Conference Board's measure hitting a 12-year low this past week. One reason could be that the year-over-year change in average hourly earnings has lagged behind inflation for five consecutive months.
What We're Reading Today
Why Microsoft's H-1B Issues Are Sending Infosys Stock to Near a Six-Year Low
Mortgages Rates Hit 3-Year High -- and Price Cuts Are on the Rise
Does a Chipotle-Starbucks Merger Make Sense?
Ties to Kalshi Throw Gambling Addiction Group Into Disarray
Global Bond Turmoil Reveals the Surprising Resilience of Emerging Markets
Google Workspace Gets AI Agents. What It Means for Alphabet Stock.
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