PANews reported that Thursday’s market action was driven by three simultaneous shocks: an escalation in Middle East conflict, mounting pressure in European sovereign debt, and a broad selloff tied to doubts over AI spending and financing. Investors moved out of equities and into bonds. The Nasdaq Composite fell 2.60%, its biggest drop since June. The S&P 500 lost 1.21%, ending a three-session winning streak, while the Dow Jones Industrial Average edged up 0.02% for a third straight gain.
Treasuries rally as the 10-year yield drops below 5%
U.S. government bonds advanced sharply. The 10-year Treasury yield fell 19.3 basis points to 4.952%, its first move below 5% in a month and its biggest one-day decline since March 2023. The rate-sensitive 2-year yield dropped 18.8 basis points to 4.635%. The 5-year and 30-year yields fell to 4.76% and 5.286%, respectively.
Options markets reflected the shift. Bullish options on long-dated Treasuries moved into a premium for the first time in seven months, and one large trader spent $7 million on a position tied to the 10-year yield falling to 4.6% next month.
PANews cited McKenzie investment strategists as saying that investors were taking profits in technology stocks after this year’s rally and rotating into Treasuries, triggering short covering in the $32 trillion bond market. Goldman Sachs strategists said the debt issuance of large technology companies had become comparable in scale to Treasury supply, and that doubts over AI spending had reduced expectations for future corporate issuance, easing pressure on the bond market in a way they compared to quantitative easing.
Not everyone agreed with the bullish bond case. The deputy CIO at DoubleLine remained bearish on long-dated Treasuries and said he was still short. He criticized Treasury Secretary Bessent for trying to talk rates lower and argued that issuance pressure had not gone away, pointing to U.S. debt above $40 trillion and a 20-year auction yield of 5.469%, the highest since 1986.
French debt selloff adds to the flight into U.S. bonds
Political and fiscal stress in Europe added to demand for Treasuries. Although French President Emmanuel Macron said rioters would be punished, the French 10-year government bond yield climbed to 5.076% and briefly moved above 5.1%. PANews said that was the first time since 2013 that the French 10-year yield traded above the U.S. 10-year yield.
The spread between French and German 10-year bonds widened to 175 basis points, the largest since the euro-area debt crisis. France’s 5-year CDS moved above 100, and French bonds even traded at yields nearly 50 basis points above Italian government debt, an unusual move.
Brent settles at $113.17 as Middle East tensions intensify
Oil prices climbed as geopolitical conflict raised concerns over supply. Brent crude rose 4% to settle at $113.17, a five-month high, while the spot premium moved above $123. WTI crude gained 2.39% to $99.47. Goldman Sachs warned that LNG supply through the strait could fall by 300 million cubic meters per day.
PANews said Houthi missiles struck the top three floors of a building at Saudi Aramco’s Dhahran headquarters, forcing an evacuation. Facilities at Yanbu port and Dammam airport were also attacked, with multiple casualties reported. At the same time, Iran’s Revolutionary Guard hit four oil tankers in the Persian Gulf, while three more struck mines. Iran also threatened to cut undersea cables in the Strait of Hormuz and attack civilian facilities in the Gulf if the U.S. and Israel resumed airstrikes after the Nov. 3 midterm election, according to the report. The U.S. military then deployed a third carrier group and evacuated family members from the U.S. embassy in Saudi Arabia.
A Global Risk Management analyst said Iran was deliberately keeping oil prices high ahead of the election as leverage. Donald Trump said, 「Iran is doing everything it can to push oil prices higher」, and threatened additional military action. PANews also said he invoked the Cold War-era Defense Production Act to provide financial incentives for domestic U.S. refining and pipeline capacity.
Gold and silver fall sharply despite the broader risk move
Precious metals moved lower instead of benefiting from the risk-off tone. Spot gold fell 2.88% and dropped below $4,000 on Friday, erasing all of its summer gains. Silver fell 5.87% to $54.42.
Independent analyst Jesse Colombo said the decline was tied to cross-market liquidation after the selloff in technology shares, as investors raised cash. He also pointed to concern over a more hawkish stance from Warsh at the Federal Reserve. Colombo added that he suspected Japan had intervened in currency markets to suppress the dollar and said the $3,900 to $4,000 range would be critical for gold.
AI financing concerns trigger a broad technology selloff
The central equity theme was a reassessment of the AI business model. PANews said market concern had moved from 「danger」 to 「crisis」. The same AI investment boom that had helped push Treasury yields higher earlier in the year was now feeding a bond rally as investors questioned returns and the burden of large-scale debt issuance. Semiconductor, memory and optical networking stocks were hit hardest, while consumer staples, healthcare and utilities outperformed. The equal-weight S&P 500 posted its best relative day against the benchmark since July 2024.
CFRA and FBB Capital said technology stocks, which account for 40% of the S&P 500 by market value, were driving a broad liquidation, with capital rotating out of recent AI winners and into defensive assets. Bloomberg strategists said free cash flow had become the key metric for technology companies as large incumbents and startups compete for massive amounts of capital.
TS Lombard strategist Dario Perkins warned that AI companies would need annual revenue of $2.5 trillion to $3 trillion by 2030, about 14 times current levels, to justify current spending. He said much of today’s revenue was still internal recycling and estimated hidden liabilities across the industry at $1.5 trillion to $2 trillion. If the bubble breaks, he said, credit losses could approach $200 billion and U.S. equities could lose $20 trillion in market value, with the S&P 500 down 30%. PANews said that view echoed comments from Citadel’s Ken Griffin.
Bulls pushed back. OpenAI is seeking $30 billion in funding at a $1.25 trillion valuation, led by the UAE and Coatue, according to the report. Blackstone President Jon Gray said AI demand was growing in a 「parabolic」 way and was not comparable to the telecom bubble of the 1990s. Pershing Square’s Bill Ackman said that if war and inflation cool, 「U.S. stocks in 2027 will be stunning」, and he reiterated his bullish stance on Netflix, Meta, Fannie Mae and Freddie Mac.
Meta, Nvidia and chip names lead the decline
Meta fell 6.98%. PANews said the company beat expectations in its third-quarter report and received support from Ackman, but investors focused on its decision to raise long-term commitments for compute and leasing to $825 billion. Third-quarter free cash flow turned negative at -$2.12 billion, and the company plans to issue new shares to raise capital. Its 5-year CDS widened to 120 basis points, a record high. The move spilled into adjacent sectors: CoreWeave dropped 10.06%, with bond yields above 15%, and GE Vernova fell 10.64%.
Nvidia lost 4.40%. The company launched its AI operations platform Minerva, but CEO Jensen Huang said, 「Capital shortages are constraining growth in the new cloud industry」. Wells Fargo said that comment intensified concern over the market’s capacity to absorb more credit demand.
Chip and optical networking stocks sold off across the board. The Philadelphia Semiconductor Index fell 6.72%. MTSI dropped 15.87%, Entegris fell 13.12%, Lam Research lost 11.76%, KLA fell 9.55%, Applied Materials dropped 8.16%, AMD fell 8.10%, Intel lost 8.04%, ASML fell 6.93%, TSMC dropped 4.52%, and Broadcom fell 4.31%. In optical networking, Coherent fell 12.51%, AAOI lost 11.96%, Lumentum dropped 11.54%, and Marvell Technology fell 8.70%.
SpaceX fell 9.14%. PANews said the company had teamed up with Nvidia on a superintelligence partner network to speed up Grok commercialization and was in talks to lease 80,000 base stations to build the fourth-largest wireless carrier in the U.S., with construction costs that could exceed $80 billion. Even so, the stock was hit by the unlocking of 1.3 billion shares on Thursday, wiping out $198 billion in market value. AT&T, Verizon and T-Mobile each fell 4.2% to 5% in after-hours trading on the competitive threat.
Memory names also weakened. SanDisk fell 8.51% and Micron dropped 6.26% as investors took profits after steep gains earlier this year. PANews said tighter scrutiny in South Korea over duplicate listings forced SK Hynix to abandon a U.S. IPO plan for its subsidiary Solidigm. SK Hynix fell 8.07%, Seagate dropped 7.86%, and Western Digital lost 6.43%.
In healthcare, Moderna fell 17.57% and was down as much as 26% intraday. Phase 3 data for its melanoma vaccine with Merck leaked early. The data showed recurrence risk and distant metastasis risk were reduced by 42% and 38%, respectively, below earlier figures. TD Cowen said the effect on preventing metastasis was not strong, and Merck fell 1.76%.
Defensive shares moved the other way. Procter & Gamble rose 5.58%, Hershey gained 4.67%, Home Depot added 4.33%, Johnson & Johnson rose 3.81%, Coca-Cola gained 2.88%, and McDonald’s climbed 2.59%.
The Magnificent Seven fell 2.80% as a group. Apple was the only gainer, up 1.23% and hitting a record high, with a market value of $5.08 trillion, close to Nvidia. PANews said Apple benefited from strong cash flow and strong demand for the $1,999 foldable iPhone Duo, with deliveries pushed out to January. The rest of the group fell. Amazon lost 4.57%, Alphabet fell 3.08%, Microsoft dropped 2.23%, and Tesla fell 3.08%. Tesla’s decline followed a third-quarter report that cut full-year capital spending guidance from $25 billion to $20 billion, raising concern over progress in autonomous driving and robotics.
After-hours and overnight movers
Guancheng International rose more than 7% in overnight trading after PANews said SpaceX was in talks to lease 80,000 base stations from the company, a deal that could be worth several billion dollars.
Western Digital fell another 6.68% in late trading. The company reported first-quarter revenue growth of 55%, issued second-quarter guidance above expectations, and raised its dividend by 17%, but that was not enough to offset selling pressure in AI-related storage names.
Bloom Energy (BE) dropped 7% after hours. Revenue rose 138% in the third quarter and the company raised full-year guidance for the third time, but operating cash flow showed a net outflow of $27.15 million, drawing a negative market response.