Stocks are on the ropes here, with equities down again after an ugly Thursday. Gold and silver are pulling back, too, while crude oil is rising. The dollar is up a smidge and Treasuries are flat.
It was an ugly day in markets yesterday, simple as that. The “Recession Trade” reared its head, with Treasuries surging on flight-to-safety buying, AI stocks getting crushed, and defensive sectors vastly outperforming offensive ones. In fact, the yield on the 10-year Treasury Note plunged 19 basis points to 4.95%, its biggest single-day drop in yield since March 2023.
XLP (Green), AIQ (Red), SOXX (Black) – 1-Mo. % Change
Source: TradingView
As for stocks, the Global X Artificial Intelligence & Technology ETF (AIQ) dropped 3% Thursday, while the iShares Semiconductor ETF (SOXX) sank 6.7%. The State Street Consumer Staples Select Sector SPDR ETF (XLP) – a defensive fund that owns food, beverage, and household goods stocks – is up more than 9% in the last month. If the strength continues, October could end up being the sector’s best month since 1998.
Meta Platforms Inc. (META) was among the biggest standouts to the downside. Meta stock dropped 7% after the hyperscaler reported negative free cash flow in the third quarter and hiked its full-year AI capex spending target by another $5 billion. Meanwhile, South Korean chipmaker SK Hynix Inc. (SKHY) shelved plans to take its memory chip division Solidigm public due to worsening market conditions. SK was hoping to raise as much as $15 billion to fund a US production facility and other investments.
One last factor adding to the gloom: Rising crude oil prices. Brent crude oil futures rose to a five-month high of $115 a barrel amid Houthi attacks in Saudi Arabia. Investors are also worried the US-Iran war will intensify after the midterm elections given threats from the Trump Administration and the lack of diplomatic progress.
