Wall Street was hoping a night’s sleep would calm the AI trade down. It hasn’t. Asia’s chip stocks were hammered overnight, CoreWeave is falling again before the open and Nasdaq futures are down more than 1%, even after TSMC posted another record quarter. Then, at 13:30 UK time, the market has to sit its second inflation test in two days.
The worry has moved on from whether people want AI to whether the companies building it can afford the bill at today’s interest rates. That is a harder question to answer quickly, which is why the selling has carried on.
The Situation Right Now
Nasdaq 100 futures are down about 1.2% and S&P 500 futures about 0.3%, while Dow futures are up about 0.3%, according to CNBC data shortly before midday UK time. That split says plenty. Money is leaving the chipmakers and AI names, not the market as a whole.
It follows a rough Wednesday, when hotter-than-expected US inflation figures knocked the S&P 500 down 1.11% to 7,718.94 and the Nasdaq Composite down 1.88%, while the Dow slipped only 0.09%. The VIX, Wall Street’s main measure of expected volatility, is up again near 17.6.
Europe is mixed. The FTSE 100 is up about 0.5% near 10,780, helped by figures showing the UK economy grew 0.1% in August, a little better than expected. Germany’s DAX is down about 0.5%, dragged lower by chip stocks.
What Changed Since This Morning?
This morning’s brief explained how the hot core inflation reading put an October rate rise back on the table and how Asia ended up paying for it. Two things have moved on since then.
First, bonds have calmed down a lot. The US 10-year Treasury yield has dropped about 10 basis points to roughly 5.09%, its lowest in almost three weeks. Traders have also scaled back their bets on a Fed rate rise at the 28 October meeting to about 29%, according to LSEG data reported by MarketWatch, having briefly pushed them close to 50% after the inflation figures.
Second, the regional banks have started reporting, with mixed results. What has not changed is the mood in tech. If anything, it has got worse.
The Biggest US Market Story
The AI sell-off has turned into a question about debt. CoreWeave, which rents out computing power for AI and has borrowed heavily to build data centres, fell 15.5% on Wednesday as the yields on its bonds jumped to nearly 15%, according to CNBC. When a company’s bonds yield that much, lenders are demanding a lot of extra compensation for the risk of not being paid back. Its chief executive Mike Intrator told staff the market was acting “irrationally” and that the company’s order book more than covers its debts. The shares are down another 6.8% in pre-market trade all the same.
This matters well beyond one company. Alphabet, Amazon, Meta and Oracle have issued more than $228 billion of bonds so far this year, according to LSEG figures cited by CNBC, more than double the whole of 2025. With the 10-year Treasury yield above 5%, paying for all those data centres is getting more expensive.
The damage has spread around the world. CNBC reports that the 20 most valuable AI and chip stocks have lost more than $1 trillion in market value this week. South Korea’s KOSPI fell 7.6% today after trading was briefly halted, Japan’s Nikkei lost 4.9% and Taiwan fell 3.4%.
The strange part is that the demand news is still very good. TSMC, the world’s biggest contract chipmaker, reported a sixth record quarter in a row this morning and guided for fourth-quarter revenue of $52.3 billion to $54.3 billion. Its US-listed shares are still down about 2.2% before the open. When record results cannot stop a slide, investors are usually worried about something other than the results.
Stocks Moving Before The Open
The chip and AI names are lower across the board. Nvidia is down about 1.9%, AMD about 3.1%, Micron about 4.4% and Intel about 4.1%. Arm and Super Micro Computer are both down around 3.6%. Dell is down about 4.1% after falling 11% on Wednesday, and Oracle is down about 2% after a near 9% drop. The bigger tech names are softer but holding up better, with Amazon down about 1.9% and Microsoft about 0.4%, while Apple is up about 0.9%.
In the banks, PNC is down about 3.2%. Its profit beat forecasts at $4.97 a share, against about $4.91 expected, but revenue of $6.56 billion was short of the roughly $6.61 billion analysts wanted and lower than the previous quarter. BNY reported earnings of $2.34 a share, up 24% on a year ago, with revenue up 12% to about $5.7 billion, and its shares are up about 1%. JPMorgan and Bank of America are both up about 0.9% after a bruising few days.
FX and the Dollar
The dollar is weaker, with the dollar index down about 0.5% near 102.05 as lower Treasury yields make it less attractive to hold. The euro is up about 0.5% near $1.121 and the pound is up about 0.5% near $1.3256, helped along by the UK growth figures. Dollar-yen has slipped to about 157.8.
Bonds
Treasuries are having a strong morning. The 10-year yield is about 5.09%, the two-year about 4.74% and the 30-year about 5.43%. Part of the move is the market deciding that slower growth and stress in AI borrowing could worry the Fed as much as inflation does. Bloomberg also reported that China may be holding more US government debt than it appears, routed through other countries, which some traders took as a sign that demand for Treasuries is steadier than feared. That report has not been confirmed.
UK gilts are following. The 10-year gilt yield is down about 9 basis points near 5.34%.
Commodities
Oil is mixed. Brent crude is down about 1.4% near $104.60 a barrel, while US crude is flat near $95.10. That is despite Ukraine saying it will resume strikes on Russian refineries and continued tension around the Strait of Hormuz. For now, traders are treating the Gulf as background noise rather than a new shock.
Gold is up about 1.6% near $4,175 an ounce and silver about 1.7%, helped by lower yields and the weaker dollar. Copper is down about 1.4%, which fits with the growth worries. Bitcoin is down about 0.9% near $80,950.
Today’s Remaining Catalysts
The big moment is 13:30 UK time, when three US releases land together. Producer prices for September, which measure what businesses charge each other and often feed through to shoppers later, are expected to have risen 0.6% in the month, up from 0.4%, with the core version forecast at 0.3%. Retail sales are expected to have grown 0.3% after a 1.2% jump in August, and weekly jobless claims are forecast at about 199,000.
The US cash market opens at 14:30 UK time. Weekly US crude oil stocks follow at 17:00, Cleveland Fed President Beth Hammack speaks at 21:30, and Fed Chair Kevin Warsh is due to speak in the early hours of Friday UK time.
Levels Traders Are Watching
These are reference points, not targets. On the S&P 500, Wednesday’s close near 7,719 is the first line and 7,700 is the round number below. For the US 10-year yield, 5.00% is the big figure below and 5.19%, Wednesday’s close, is the level that would undo this morning’s bond rally. CoreWeave’s Wednesday close near $65.78 is a useful sign of whether the AI selling is easing. Gold has $4,200 above, Brent has $100 below, and for the pound, $1.33 is the next big figure.
Where That Leaves Us Into The Open
The fair reading going into the open is cautious, with the pressure still on tech. The evidence for that is clear enough: Asia’s chip rout, CoreWeave and its peers still falling, and TSMC’s record quarter failing to turn the mood. On the other side, bond yields have fallen a long way, rate rise bets have cooled, the Dow is holding up and the big banks are steadier.
Opportunities are more likely to come from the reaction to the 13:30 figures and from the gap between beaten-up AI names and the rest of the market, rather than from a clean trend in the index. The main risk is a hot producer price reading that pushes the 10-year yield back above 5.19% and puts an October rate rise back in play, which would land hardest on the companies that have borrowed most for AI. The view would improve if prices come in soft, yields keep falling and CoreWeave climbs back above Wednesday’s close. The markets to watch are Nasdaq futures, the 10-year yield, the chip stocks, gold and the dollar.
For beginners, the lesson today is that good company results do not always mean a rising share price. When the market is worried about debt and interest rates, even record profits can be ignored for a while. This is an educational view of the market, not advice to buy or sell anything.
If you want to see how you would handle a morning like this, with a sector sell-off, a bond rally and big data still to come, the free Samuel & Co Trading trader assessment is a good place to test your approach.
