The Nasdaq Composite lost about 4.5% last week, its worst stretch since late June and the end of a monthlong winning run. The S&P 500 slipped roughly 2%. The bottom line: money is leaving tech and heading for safer corners of the market just as the third-quarter earnings season picks up speed.
Rates are doing the damage
By the numbers, the 10-year Treasury yield sits near 5.10%. That matters because growth stocks are priced on profits far in the future, and a higher yield shrinks what those profits are worth today. Hot consumer and producer price reports midweek pushed traders to wonder how long the Fed will hold rates high. Odds of a hike this month, which jumped after the inflation data, have since fallen back to somewhere between 15% and 17%, but the chance of one before year-end still tops 90%, according to the CME FedWatch Tool.
Chips took the worst of it on Friday, October 16. Intel fell 5.8% and Micron 5.6%. Investors want to know whether the huge sums going into AI hardware will ever pay for themselves. Brent crude touching $110 a barrel for the first time since May, as Iran stepped up attacks in the Strait of Hormuz, did not help the mood.
Defensive names caught the money. Walmart and Berkshire Hathaway rose as consumer staples took the sector lead, and health care gained on Thursday while technology dropped.
Is the AI trade cracked?
Not everyone thinks so. Bank of America analysts led by Vivek Arya say deployed AI infrastructure is running near 100% utilization, and that GPU rental rates are up 12% to 37% so far this year. In their words, that points to scarcity, not glut. They also concede real risks: a credit wipeout at a neocloud company, pressure from the rates market, and delays in power and permitting.
Debt is where the worry sits. CoreWeave shares slid again on Friday on concerns about a balance sheet loaded with borrowing, even after Nvidia chief Jensen Huang spoke up for the company a day earlier. The comparison people keep making is the fiber build-out of the early 2000s, when companies laid cable ahead of demand and several went bankrupt.
What the banks said
The season opened with JPMorgan Chase and Goldman Sachs on Tuesday, October 13. Results held up, though some figures missed estimates. Both flagged higher loan loss provisions and rising credit costs, and that kept investors from feeling much relief.
The week ahead
Few economic releases are on the calendar. Earnings carry the week. Netflix reports on October 20. Tesla and Meta follow on Wednesday, October 21, alongside IBM, Texas Instruments and AT&T. Tesla stock gave up early gains and closed down 2% last Friday after it showed off a redesigned Roadster. Netflix is down 40% this year. On Friday, October 23, the preliminary S&P Global PMIs land.
Investors will note what they are really listening for: how much cash is left after the AI spending, and whether the mega-caps can protect margins with borrowing costs this high. The S&P 500 also sat just above its 50-day moving average of 7,706 last week, a level traders are watching.
Sources
- 【US Stock Market Outlook for the Week of Oct 19–23: Earnings Season Intensifies Amid Risks of Prolonged High Interest Rates: A Week to Gauge the Transition to an Earnings-Driven Market】｜アメリカ企業リサーチラボ（US_Research_Lab）
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Photo: Billie Grace Ward from New York, USA (CC0)
