Shares tumble as tech's AI angst deepens
MSCI's global equities gauge went into reverse on Thursday as Wall Street worries about the enormous cost of the AI boom deepened and US Treasuries were in demand after weak labour market data, while silver took a hammering and oil fell.
With the closely watched non-farm payrolls report delayed until next week due to a brief US government shutdown, investors were paying close attention to alternative employment data.
Treasury yields lost ground after data showed new applications for unemployment benefits rising more than expected last week. And yields extended losses after the Labour Department's Bureau of Labour Statistics' Job Openings and Labour Turnover Survey (JOLTS) report showed US job openings dropping to the lowest level in more than five years in December while prior month data was revised lower.
Separately, recruitment firm Challenger, Gray & Christmas said layoffs announced by US employers surged in January amid losses of business contracts and an uncertain economic environment, marking the highest level for the month in 17 years.
Along with the disappointing labour market data, Ameriprise Chief Market Strategist Anthony Saglimbene said investors are worried about how much technology companies say they need to spend to support artificial intelligence (AI) demand.
The latest example is Google parent Alphabet's announcement on Wednesday of a 2026 capex spending plan of as much as $185 billion — 55% more than analysts expected.
And while the stock market has benefited this year from investor rotation into cyclical stocks besides technology, continuous pressure on technology is eating at investors' broader risk appetites, he said.
"If big tech and AI lose more momentum, it's likely that broader averages like the S&P 500 will see more pressure. There's good rotation happening but not enough to hold up the broader averages the way it has so far this year," Saglimbene said.
"Investors today are starting to turn more defensive in their positioning because the market is starting to lose momentum."
On Wall Street at 1644 GMT, the Dow Jones Industrial Average fell 489.19 points, or 0.99%, to 49,012.11, the S&P 500 fell 61.34 points, or 0.89%, to 6,821.38 and the Nasdaq Composite fell 207.66 points, or 0.91%, to 22,696.92.
MSCI's gauge of stocks across the globe fell 10.12 points, or 0.97%, to 1,029.93.
The pan-European STOXX 600 index fell 1.07%.
In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.14% to 97.82, with the euro down 0.09% at $1.1795.
Against the Japanese yen, the dollar strengthened 0.04% to 156.91.
The yen has fallen for four straight days ahead of a general election on Sunday where polls are pointing to a decisive victory for Prime Minister Sanae Takaichi, endorsing her spending ambitions that have raised concerns about the nation's strained finances.
Sterling weakened 0.74% to $1.3547. The Bank of England kept rates at 3.75% but an unexpectedly close 5-4 vote had traders pricing in a much higher chance of a near-term rate cut, which nudged gilt yields lower along with the pound.
Meanwhile, the European Central Bank left euro zone rates at 2% and offered no immediate clues about its next move, reinforcing bets of nothing for a while.
A prolonged selloff in bitcoin showed no sign of stopping as it dropped below $70,000 to its lowest since late 2024. Bitcoin was last down 6.89% at $67,617.82.
In Treasuries, the yield on benchmark US 10-year notes fell 6.2 basis points to4.216% from 4.278% late on Wednesday, while the 30-year bond yield fell 5.1 basis points to4.8643%.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 6.5 basis points to3.494%, from 3.559% late on Wednesday.
Silver slumps again
In precious metals, silver and gold fell again. Both metals were coming off two days of gains that recouped some losses from last week's plunge from record highs.
Spot silver fell 12.81% to $76.76 an ounce after earlier falling as low as $72.21, while spot gold fell 1.75% to $4,875.65 an ounce.
Oil prices slipped nearly 3% after the US and Iran agreed to hold talks in Oman on Friday, easing concerns around any bottlenecks in Iranian crude supplies.
US crude fell 2.82% to $63.28 a barrel and Brent fell to $67.54 per barrel, down 2.76% on the day.