By Jamie McGeever
ORLANDO, Florida, Oct 14 (Reuters) – US stocks fell sharply on Wednesday, with the Nasdaq clocking its biggest fall in three months, on surprisingly strong inflation data and deepening worries over the costs involved in financing the AI buildout. The inflation figures put a Fed rate hike later this month back on the table, which lifted the dollar to a fresh 18-month high.
Today’s Key Reads
• US inflation heats up in September; Fed rate hike this month back on table
• IMF calls for US to cut deficits amid bond woes, urges China to shift away from exports
• Why governments might secretly wish for an AI stumble: Mike Dolan
• As Wall Street banks finance and adopt AI, risks mount on both fronts
• Bond trading weakens for US banks as interest rate volatility affects investors
• Today’s Key Market Moves STOCKS: Asia in the red, China -1%. Europe +0.4%, UK +0.7%. Americas in the red: Nasdaq -1.9%, S&P 500 -1.1%.SECTORS/SHARES: Eight sectors on the S&P 500 fall, three rise. Tech -2.6%, healthcare and consumer staples +2.4%. “SOX” chip index -4.2%, down for sixth day, longest losing streak in nearly two years. Coreweave -15.5%, Dell -11%, Oracle and Marvell -9%. UnitedHealth, Moderna, Bristol-Myers Squibb all up 4-5%.FX: Dollar up strongly again, new 18-month high. Mexican peso, South African rand among the biggest EM FX decliners, euro, sterling, Swedish crown the biggest G10 losers.BONDS: US AI-related corporate bonds fall sharply, many to new lows. Yields rise, spreads widen. Longer-dated US Treasury yields fall 3-4 bps, curve flattens.COMMODITIES/METALS: Oil up, WTI +1%. Gold -1%, silver -6.5%.
Today’s Talking Points:
AI bond blues
Investor sentiment towards AI financing — or more pointedly, circular financing — is souring. Rapidly. Coreweave’s 9.75% bond issued in July and maturing in 2031 on Wednesday yielded 16% and slumped to a new low in price. Meta’s “Beignet Investor” bond maturing in 2049 is also hovering around its lows, and both bonds are down around 20% from issue. Oracle’s 4.9% bond maturing in 2033 registered a record low today. You get the picture.
Borrowing costs and spreads are spiraling higher, which deepens investors’ concerns, risking further selling and intensifying the negative feedback loop. What stops the rot? In the near term, strong earnings and positive outlooks from CEOs and CFOs in the coming weeks might help. But if selling pressure on AI-related bonds and stocks persists, are we ultimately looking at some sort of intervention?
Source: finance.yahoo.com
