U.S. stocks, especially those heavily exposed to the AI investment theme, experienced meaningful losses today as the market continued to reassess AI infrastructure companies’ valuations. Although forecasts for AI infrastructure capital expenditures over the next few years have not been revised substantially, investor concerns have intensified after Meta reported negative free cash flow in its earnings report and Lam Research issued earnings guidance that was less impressive than expected.
The market rotated today, with traditionally defensive stocks gaining significantly while AI-related stocks posted heavy losses. The Dow ended 12 points higher at 52,868, reflecting its relatively limited exposure to AI. The Nasdaq, a technology-heavy index, fell 2.6% to 26,009. The S&P 500 ended 1.21% lower at 7,663. The technology sector fell 3.63%, while a semiconductor index lost 7.15%. Consumer staples and utilities gained 3.21% and 2.14%, respectively.
As stocks slid, bonds rebounded, demonstrating the benefits of diversification—a sight that has become rare in recent years. Both the 5-year and 10-year Treasury yields declined by a remarkable 19 basis points, to 4.78% and 4.96%, respectively. Unfortunately, with oil prices rising at the same time, the chance of higher short-term interest rates has become more pronounced, contributing to a sharp decline in gold prices.
Today’s economic data continued to show very limited layoffs, maintaining the trend of low firing and low hiring. The leading indicators came in slightly better than expected.
Tomorrow there will be a consumer survey and preliminary manufacturing and service surveys. Adams Wealth Advisor will be back to provide a summary of this week. Thank you for listening.