Markets in 5Friday, October 23
AI spending worries drive tech sell-off as yields fall
Tech led a sharp Thursday sell-off as AI spending worries mounted, while the 10-year Treasury yield fell to 4.96% and markets trimmed bets on a Fed hike.
Stocks
Tech selloff pulls Nasdaq down 2.6% on AI spending worries
The Nasdaq Composite fell 2.6% to 26,008.86 on Thursday, its steepest drop since June, while the S&P 500 lost 1.21% to 7,663.43, its worst day since July. Renewed concern that tech companies will struggle to fund AI spending hit semiconductors and hyperscalers, and Meta's plan to boost capital spending added to the unease. Chipmakers fell nearly 7%, pushing the Nasdaq 100 to its worst day since June. The Dow was roughly flat, up 0.02%, and the equal-weight S&P 500 ETF rose 0.73%, so most US stocks finished higher.
Rates
Ten-year Treasury yield falls 17 basis points to 4.96%
The 10-year Treasury yield closed at 4.96% on October 22, down from 5.13% the previous day, according to official Treasury par yield data. MarketWatch reported it was the biggest daily drop in yields since the 2023 banking crisis, as investors moved into bonds during the equity sell-off. The 2-year yield fell to 4.65% from 4.81%, leaving the 2s10s spread at 31 basis points. The 10-year stood at 3.97% a year earlier.
Economy
Weekly jobless claims fall to three-month low of 194,000
Initial jobless claims fell by 6,000 to 194,000 in the week ended October 17, according to Bloomberg, below the 200,000 expected and the lowest level in three months. The figure was released at 8:30 a.m. ET on Thursday. Separately, September consumer prices rose 3.7% year over year, above the 3.6% expected, keeping inflation a live question for rate markets.
The Fed
Markets pare bets on another 2026 Fed rate hike
Markets pared bets on another rate increase this year after the bond rally, according to Bloomberg. The Fed's target range remains 3.75% to 4.00%, in effect since September 17. The central bank is in a blackout period before its October 27-28 FOMC meeting, so no Fed speakers are expected to comment this week. The decision is due October 28 at 2:00 p.m. ET, with a press conference 30 minutes later.
Earnings
Sallie Mae cuts full-year EPS outlook on higher charge-offs
Sallie Mae, formally SLM Corp., now expects full-year earnings per share of $1.95 to $2.05, down from earlier guidance of $3.10 to $3.20, the Wall Street Journal reported. The private student loan company cited higher charge-offs. Meta, Tesla, Spotify, P&G and Blackstone reported on Thursday, and American Express is among the companies due before the open on Friday.