Stocks were lower Thursday as escalating concern about Mideast conflict pushed oil futures higher, spurring inflation fears with US midterm elections less than two weeks away. Meta Platforms Inc. tumbled as investors parsed its results along with the rest of the latest batch of technology earnings for evidence that massive spending on AI is paying off.
Tech shares led the broader stock market lower, with the Nasdaq 100 Index sliding 2.2% as of 12:10 p.m. in New York and the S&P 500 Index dropping 1.0%. West Texas Intermediate crude oil rose 1.7% to $98.82 a barrel, while yields on 10-year Treasuries retreated to 5.00%. The US ordered some diplomats and their families out of Saudi Arabia because of the threat from Houthi militants, and at least four people were killed by attacks on an Aramco oil site and a Saudi Arabian airport on Wednesday.
“Investors should stay invested for further equity gains via broadly diversified exposure across sectors and regions,” while building resilience via fixed income and commodities, Ulrike Hoffmann-Burchardi, UBS global equities head said in a note.
Meta slid 6.2%, the most intraday since late July, even after reporting better-than-expected results and boosting its capital spending outlook. Shares had initially traded higher following the results, as CEO Mark Zuckerberg touted its AI agent Muse. On Thursday, a gauge of the company’s credit risk surged to a fresh record as spending plans reignited fears tech giants will issue more debt in an already-saturated market. Tesla Inc. shares shed 1.5% after the electric-car maker cut its spending plans. Elevated operating expenses underscored the cost of its AI, robotics and autonomy push.
The sector faces broad threats, according to Apollo Chief Economist Torsten Slok. “If the AI payoff is slow to materialize or never arrives, venture capital returns would come under pressure, since the capital funding today’s token spending would have little to show for it, and a pullback in venture funding could in turn weaken demand for compute,” he warned in a note.