Wall Street Ends Rocky Week Lower as Investors Assess AI Spending

Highlights

Wall Street’s major indexes ended Friday lower, capping a volatile week shaped by investor concerns about the cost and outlook of artificial-intelligence investment. The Nasdaq Composite slipped after a steep previous-session decline, while the S&P 500 technology sector gained 0.35%. The Dow fell 1.23%, and the S&P 500 and Nasdaq also finished down. For the week, the S&P 500 lost 0.5% and the Nasdaq 0.7%, while the Dow rose 0.4% for its third consecutive weekly gain. Investors are now watching major technology-company earnings and the Federal Reserve’s upcoming policy decision. Energy stocks advanced as oil prices rose amid Middle East supply concerns.

Sentiment Analysis

• Overall sentiment: Cautious and mixed. The major indexes fell on Friday, and two of the three principal benchmarks posted weekly losses. Broad declines across consumer and financial shares, alongside weak market breadth, reflected investor unease.
• Technology and AI outlook: Technology shares showed some stabilization, and the S&P 500 technology sector rose 0.35%. However, concerns about the cost of AI investment and the possibility of reduced data-center spending remained a source of uncertainty. Upcoming results from major companies may offer further indications of spending plans.
• Positive areas: Energy shares gained 2.5% and reached a record high, supported by rising crude prices and concern about Middle East supply disruptions. The Dow also recorded a weekly gain, its third in a row.
• Investor focus: Sentiment is likely to remain sensitive to corporate earnings, the Federal Reserve’s guidance, and the November 3 midterm elections. A University of Michigan survey also indicated consumer sentiment was near a record low in October.

Article Text

U.S. stocks ended Friday lower, bringing a turbulent week for financial markets to a close. Technology shares steadied to some extent after a sharp sell-off in the previous session, but losses across most S&P 500 sectors weighed on the broader market. Investors were also looking ahead to a busy schedule of corporate earnings and an upcoming Federal Reserve policy meeting.

The Nasdaq Composite recorded a modest decline after suffering its largest one-day drop since June on the prior day. The sell-off had been driven in part by concerns about the financing costs associated with substantial artificial-intelligence investment. On Friday, the S&P 500 technology sector rose 0.35%, offering a partial counterpoint to the overall weakness. Consumer staples, consumer discretionary, and financial shares were among the groups that fell by well over 1%.

The Dow Jones Industrial Average lost 652.82 points, or 1.23%, to close at 52,215.16. The S&P 500 fell 39.75 points, or 0.52%, to 7,623.68, while the Nasdaq Composite declined 53.52 points, or 0.21%, to 25,955.34. Across the week, the S&P 500 fell 0.5% and the Nasdaq dropped 0.7%. The Dow, by contrast, rose 0.4%, extending its weekly gains to three consecutive weeks.

Attention is turning to results from roughly one-third of S&P 500 companies due to report quarterly earnings next week. Alphabet, Microsoft, and Amazon are among the companies scheduled to release results. Because these large technology companies are major AI investors, market participants are expected to scrutinize their capital-spending forecasts. Kristina Hooper, chief market strategist at Man Group, said doubts about the AI trade were still affecting investors. She noted the possibility that investment in AI data-center construction next year could be lower than previously projected.

The scale and expected returns of AI-related spending have become a key point of uncertainty for the market. Corporate earnings growth has helped support major equity indexes this year, and LSEG IBES data indicate that S&P 500 companies are on track to increase earnings by more than 32% in the third quarter. Investors will compare reported results with expectations and assess what companies say about future investment and business conditions.

Sector performance was uneven. Telecommunications stocks declined after a report said SpaceX was seeking thousands of cell sites for a fourth wireless carrier. AT&T and T-Mobile shares each fell nearly 8%, while Verizon dropped 1.2%. SpaceX shares gained 1.9%. U.S. cell tower operators moved higher, with Crown Castle rising 9% and American Tower gaining 4%.

Energy was the strongest area among the reported sector moves, rising 2.5% to a record high. Brent crude reached its highest level since late April after Houthi attacks in Saudi Arabia raised concerns about possible further disruption to Middle East energy supplies. Individual company moves included a 3.7% decline in American Express, which weighed on the Dow. The company raised its profit forecast while announcing plans to eliminate 5% of its workforce. SLB rose 7% after the oilfield services provider reported third-quarter profit above Wall Street estimates.

Economic and policy developments also shaped the outlook. University of Michigan data showed U.S. consumer sentiment edged down near a record low in October, as rising prices linked to the Middle East conflict affected households’ views of the economy. The Federal Reserve is expected to leave interest rates unchanged in its Wednesday policy statement. Investors will nevertheless look for clues about whether the central bank might raise rates at its December meeting. Markets are also increasingly focused on the November 3 midterm elections, which will determine control of the U.S. Congress.

Market breadth was negative. On the New York Stock Exchange, declining issues outnumbered advancing issues by a 1.72-to-1 ratio; on the Nasdaq, decliners outnumbered advancers by a 1.57-to-1 ratio. The S&P 500 registered 18 new 52-week highs and 8 new lows. The Nasdaq Composite recorded 74 new highs and 334 new lows. Trading volume on U.S. exchanges reached 15.4 billion shares, compared with the 17.2 billion average over the last 20 trading days.

Key Insights Table