Wall Street closed sharply lower on Friday, as renewed selling in artificial intelligence-related stocks and a surge in oil prices weighed on investor sentiment. The Dow Jones Industrial Average fell 189.01 points, or 0.36%, to 51,990.05, while the S&P 500 dropped 85.44 points, or 1.10%, to 7,658.62. The Nasdaq Composite led the decline, losing 572.99 points, or 2.15%, to 26,137.85.
The Cboe Volatility Index (VIX) rose above 22 for the first time in four months, signaling increased market uncertainty. Investors reduced risk ahead of the weekend, grappling with concerns over AI infrastructure debt, persistent inflation, and the Federal Reserve's interest rate outlook.
AI Stocks Extend Losses
Technology shares remained under pressure as investors reassessed the outlook for companies with heavy AI infrastructure investments. CoreWeave, a data center operator backed by Nvidia, fell 13% on Friday, extending its weekly losses to more than 26%. Its debt has climbed above $51 billion, and yields on its bonds rose above 15% during the week.
Broadcom also declined, while the Philadelphia Semiconductor Index recorded its eighth consecutive daily loss. The VanEck Semiconductor ETF fell 3% on Friday and was down around 10% for the week, its steepest weekly decline since July. Micron Technology, Advanced Micro Devices, and SanDisk were among the chipmakers weighing on the sector amid concerns about competition from Chinese memory manufacturers.
Investors are questioning whether AI infrastructure companies can generate sufficient profits to service their growing debt burdens, particularly if borrowing costs rise further. The sell-off highlights the market's reliance on a relatively narrow group of technology stocks, with most of the S&P 500's gains this year coming from AI-related names.
Oil Prices Jump on Geopolitical Tensions
Energy prices added to the pressure on equities as escalating tensions in the Middle East and continued attacks on energy infrastructure involving Russia and Ukraine raised concerns about supply disruptions. West Texas Intermediate crude futures rose 3.51% to settle at $101.41 a barrel, while Brent crude futures gained 3.72% to $109.86.
Higher oil prices have added to inflation concerns, following hotter-than-expected US consumer and producer price reports released during the week. Producer prices recorded their largest increase since 2022, while consumer inflation remained above the Federal Reserve's 2% target. Rising energy costs could further complicate the central bank's efforts to bring inflation under control. Energy stocks, including Chevron, gained as crude prices climbed, helping limit the Dow's losses.
Fed Outlook and Earnings Season in Focus
Investors continued to assess the Federal Reserve's next policy move after Chair Kevin Warsh expressed optimism about the strength of the US economy but offered no clear indication of the interest rate path. Markets increasingly expect the Fed to leave rates unchanged at its October 27–28 meeting, with the CME FedWatch tool indicating an 82% probability of a hold. However, Barclays now expects the central bank to deliver quarter-point rate hikes in December and January.
The uncertainty comes as investors prepare for a busy week of corporate earnings, with Tesla, Meta Platforms, and Procter & Gamble scheduled to report third-quarter results. Analysts expect quarterly earnings to rise more than 30%, driven largely by major AI-related technology companies. However, further pressure on technology shares could weigh on broader market performance if investor concerns over valuations, financing costs, and inflation persist.
This article is for informational purposes only and does not constitute financial advice.
