Wall Street ends volatile week lower on AI spending doubts and oil-fueled inflation fears

what happened

According to The Wall Street Journal, U.S. indexes swung sharply this week as investors weighed two pressures at once. One is doubt about how long the artificial-intelligence spending boom can last. The other is concern that persistent conflict in the Middle East will push inflation higher. On Friday the Dow fell 1.2%, or 653 points, while the Nasdaq dropped 0.2%. For the week, the S&P 500 lost 0.5% and the Nasdaq fell 0.7%, while the Dow gained 0.4%.

The tech sell-off on Thursday followed Meta Platforms' plan to issue a new class of nonvoting shares to fund AI model development, which raised questions about whether the company and its peers can raise enough capital. Spreads on bonds tied to AI companies, including Oracle, SpaceX and Meta, widened further. Treasury yields posted their biggest one-day drop in three years on Thursday, yet the 10-year yield closed the week at 4.987%.

On Friday, Brent crude climbed back to levels last reached in April, as traders priced in renewed fighting in Iran after the election, and yields pushed higher again. The Fed had already raised rates for the first time in three years, and economists warn that prolonged high oil prices pose a risk to the economy. Banks, industrials and consumer names such as Home Depot, Nike, Coca-Cola and McDonald's were among the biggest decliners.

why it matters

Higher oil prices and bond yields keep pressure on equities, particularly in rate-sensitive sectors and among companies that borrow heavily to build AI infrastructure. Attention now turns to third-quarter earnings and the upcoming Fed meeting, where most traders expect policymakers to hold off on further hikes. As the WSJ notes, investors want more evidence that AI spending will pay off before sentiment improves.

market impact

US stocks and bonds: higher oil and yields pressure the market, especially banks and tech

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