Wall Street Faces a Double Blow From AI Fears and Rising Oil Prices

Market Wrap-Up: Tech Weakness, Oil Gains, and Rate Risks 

US stocks ended lower on Thursday, led by a sharp decline in technology shares as investors reassessed the outlook for AI-related spending. The Nasdaq Composite fell 2.60% to 26,008.86, recording its largest one-day percentage decline since June 5. The S&P 500 lost 1.21% to 7,663.43, while the Dow Jones Industrial Average edged up 0.02% to 52,867.98.

Semiconductor stocks faced particularly heavy selling, with the Philadelphia Semiconductor Index plunging 6.7%, its steepest daily percentage drop since June 23. Meta Platforms shares fell 7.0% as concerns over AI-related expenditure overshadowed stronger-than-expected results, with the company reporting its first cash outflow in more than a decade.

Tesla shares fell 3.1% despite the electric carmaker cutting its 2026 capital spending plans. Meanwhile, Spotify gained 11.1% following its fourth-quarter profit forecast, while Lockheed Martin advanced 7.0% after raising its annual sales and profit outlook.

Crude oil prices climbed to a five-month high on Thursday after Houthi attacks on Saudi Arabia heightened concerns over potential energy supply disruptions. Brent crude futures and US West Texas Intermediate (WTI) subsequently traded little changed in early Asian trading on Friday. Brent fell 0.2% to $112.96 a barrel, while WTI declined 0.3% to $98.12 as of 00:30 GMT.

Supply concerns extended beyond Saudi Arabia. Libya's National Oil Corporation reported that a pipeline valve connecting the Hamada and Tahara oilfields to Zawiya port had been shut, reducing production at both fields. Meanwhile, Saudi Aramco ordered the evacuation of its headquarters in Dhahran on Thursday, according to Reuters, as fighting intensified between Saudi Arabia and Yemen-based Houthis.

Gold fell to its lowest level in more than two months on Thursday as higher oil prices intensified inflation concerns and reinforced expectations that interest rates could remain elevated for longer. Spot gold dropped 2.4% to $4,041.39 an ounce by 2:05 p.m. EDT, its lowest level since 3 August. US gold futures for December delivery settled 2.2% lower at $4,060.40 an ounce.

US labour market data continued to indicate limited layoffs. Initial jobless claims fell by 6,000 to 194,000 in the week ended 17 October, remaining at or below 200,000 for six consecutive weeks. However, continuing claims increased by 25,000 to 1.728 million, highlighting a more mixed picture of employment conditions.

Markets will focus on today's US flash manufacturing and services PMIs, alongside the final Michigan Consumer Sentiment and Inflation Expectations readings. The data could influence expectations for the Federal Reserve's next policy moves, particularly amid persistent inflation concerns and elevated oil prices.

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DXY

Key Takeaways

·         Resilient US initial jobless claims have reinforced expectations that the Fed could maintain restrictive monetary policy, keeping the interest-rate outlook in focus.

·         Markets are assessing whether persistent inflation risks will sustain demand for the US dollar ahead of next week's Fed meeting.

Technical Outlook

·         Daily Bias: Bearish

·         Support: 101.45

·         Resistance: 101.88

XAU/USD

Key Takeaways

·         Elevated oil prices are increasing concerns over persistent inflation, adding pressure to non-yielding gold.

·         The possibility of a December rate hike remains a potential headwind, with today's US activity data and consumer inflation expectations in focus.

Technical Outlook

·         Daily Bias: Bearish

·         Support: 3,987

·         Resistance: 4,142

Brent Oil CFD

Key Takeaways

·         Houthi attacks on Saudi Arabia and the evacuation of Saudi Aramco's headquarters have heightened concerns over regional supply disruptions.

·         The shutdown of a Libyan oil pipeline adds another supply risk, keeping attention on potential disruptions across key exporting regions.

Technical Outlook

·         Daily Bias: Bullish

·         Support: 103.37

·         Resistance: 111.00

Nasdaq Composite CFD

Key Takeaways

·         Renewed doubts over AI spending are weighing on technology valuations, with semiconductor stocks bearing the brunt of the selloff.

·         Investors are reassessing the sustainability of AI-related investment returns as major technology companies report earnings and spending plans.

Technical Outlook

·         Daily Bias: Bullish

·         Support: 28,849

·         Resistance: 29,930

Calendar Watch

·         S&P Global Flash Manufacturing PMI: Provides an early signal of manufacturing activity and economic momentum, with implications for growth and inflation expectations. 

·         S&P Global Flash Services PMI: Offers insight into services-sector activity and price pressures, helping markets assess the outlook for US economic growth and Fed policy.  

·         Final Michigan Consumer Sentiment: Tracks consumer confidence and economic perceptions, providing clues about household spending and the broader economic outlook. 

·         Final Michigan Inflation Expectations: Measures consumers’ inflation outlook, which could influence expectations for the Fed’s interest-rate path amid elevated oil prices.

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