Nasdaq leads Wall Street lower on AI spending jitters; oil prices rebound

Oct 22 — The tech-heavy Nasdaq slid more than 1% on Thursday as growth stocks weakened after earnings from mega-caps Tesla and Meta failed ​to allay AI-related concerns, with a recovery in oil prices further adding to market unease.

The weakness follows a strong session on Wednesday when the Nasdaq led Wall Street higher as robust results from SpaceX and Super Micro rekindled optimism around ‌AI-linked stocks.

SpaceX dropped 3.9% and Super Micro fell 3.4% on Thursday as investors looked past earnings and weighed the soaring costs of AI investments and unclear return timeline.

Tesla fell 1.9% ⁠after the electric-vehicle maker cut annual capital expenditure forecast, raising questions ​about the pace of its AI and robotics ambitions.

Separately, Reuters ⁠exclusively reported that some Tesla insiders were concerned that CEO Elon Musk's public comments on a potential merger with SpaceX could invite shareholder ‌scrutiny and complicate deal talks.

Meta's shares ‌slipped 6.7% after the social media giant introduced new non-voting shares to help fund its costly AI expansion.

"The thing that ⁠makes these AI names more vulnerable is just that they have such high ⁠valuations already. So any kind of little trip up in the market is going to cause a big decline in some of these stocks," said Brendon Dashiell, portfolio manager for investment research at Bogart Wealth.

"We think markets will continue to be choppy, but we're still cautiously optimistic."

Other constituents of the 'Magnificent 7' group also declined, with Amazon.com and Nvidia down about 2% each.

Chip stocks dropped, too. Intel was down 5.3%, while AMD, Qualcomm, Marvell Technology, Broadcom and Micron Technology slipped between 1.9% and 5.2%.

The renewed jitters ‌sent the CBOE Volatility Index up 17.86 points, after three straight sessions of declines.

Six of the ​11 S&P 500 sectors posted losses, led by technology, which fell 1.6%.

The consumer staples and healthcare indexes, however, were the biggest gainers, as investors sought defensive sectors.

At 09:41 a.m. ET, the Dow Jones Industrial Average fell 138.80 points, or 0.26%, to 52,716.35. The S&P 500 lost 63.14 points, or 0.81%, to 7,694.03, while the Nasdaq Composite slipped 393.22 points, or 1.46%, to 26,312.94.

The S&P 500 value index was flat compared to a 1.4% drop in its growth counterpart.

Meanwhile, weekly jobless claims unexpectedly fell, pointing to a resilient labor market and supporting expectations that the Federal Reserve will keep interest rates unchanged at its meeting next week.

Brent crude was hovering ​near its five-month high, after more Houthi attacks in Saudi Arabia stoked fears of supply disruptions and a wider Middle East conflict. [O/R]

A flight to safety pushed the 10-year ‌yield down to ‌around 5.0378%.

IBM fell 1.4% even ⁠after raising annual software revenue forecast and surpassing third-quarter expectations.

Blackstone posted a drop in quarterly earnings, yet shares of the world's largest alternative asset manager rose 2.3%.

Lockheed Martin climbed 9.4% after the defense contractor raised annual sales and profit forecast.

Spotify rose 8.7% after the Swedish music streaming firm forecast fourth-quarter profit above Wall Street estimates, betting on its AI-powered features to drive user growth.

S&P 500 third-quarter earnings growth is now forecast at ‌32.3%, up from 30.7% previously, according ​to LSEG data.

Declining issues outnumbered advancers by a 1.08-to-1 ratio on the NYSE ‌and by 1.18-to-1 on the Nasdaq.

The S&P ⁠500 posted 24 new 52-week highs ​and three new lows, while the Nasdaq Composite recorded 31 new highs and 151 new lows.

(Reporting by Tharuniyaa Lakshmi and Ragini Mathur in Bengaluru; Editing ​by Shilpi Majumdar)

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