The Nasdaq fell 4.5% last week as a sinking AI trade and hotter-than-expected inflation data rattled stocks. The Dow gained 0.7% as investors rotated into sectors less dependent on AI. Solid bank earnings did not translate into stock gains.
The Nasdaq's 4.5% weekly decline broke a four-week winning streak and was the tech-heavy index's worst weekly drop since June. The S&P 500 fell 2%. The Dow Jones Industrial Average gained 0.7% as investors moved into healthcare, consumer staples and other sectors less dependent on the artificial intelligence boom.
Inflation data raises rate worries
The sell-off accelerated Wednesday after hotter-than-expected consumer inflation data raised concerns that the Federal Reserve could keep interest rates elevated for longer. September's consumer price index rose 3.7% from a year earlier, above the 3.6% expected.
Thursday's producer price index offered little relief. It jumped 1.3% for the month and 6.3% annually, the biggest annual and monthly gains since March 2022 and December 2022, respectively. Higher inflation, fueled partly by elevated oil prices, threatens to push up borrowing costs and complicate the AI infrastructure buildout.
Chip and neocloud stocks take the hit
Investors also grew concerned about rising borrowing costs and mounting competition in semiconductors. The VanEck Semiconductor ETF fell 10% for the week, its worst week since July, and the iShares Semiconductor ETF extended its losing streak to nine straight sessions.
Neoclouds suffered too. CoreWeave, whose total debt has risen to more than $51 billion, plunged 25% last week. Broadcom CEO Hock Tan warned Monday that access to capital could become the industry's next major constraint.
Banks beat estimates, but shares lag
Third-quarter bank earnings were largely solid, yet the results failed to lift the stocks. Goldman Sachs reported equities trading revenue up 72% and investment banking fees up 21%, but its shares surrendered an early rally.
Wells Fargo beat earnings estimates and missed on revenue, while its net interest margin stabilized at 2.43% after four consecutive quarterly declines. CNBC's Investing Club says the episode shows the value of diversification, though it is unclear how long the rotation will last.
Source: CNBC
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