ASX set to slide as Wall Street falls; oil at highest since May

Drops for stocks in the artificial-intelligence industry are dragging markets down worldwide, while oil prices hit their highest levels since May on worries about the war with Iran.

The S&P 500 sank 1.3 per cent with the Nasdaq composite down 2.4 per cent, but stocks outside of tech did better, and the Dow Jones Industrial Average was down a more modest 0.1 per cent.

The Australian sharemarket is set to retreat, with futures at 4.55am AEDT pointing to a loss of 19 points, or 0.2 per cent, at the open. The ASX lost 0.4 per cent on Thursday. The Australian dollar was weaker at US70.19¢.

AI-related stocks on Wall Street have been shaky on worries that their boom may be under threat because of how expensive it’s become to borrow money to build data centres and buy more AI chips. Concerns also remain that stock prices simply shot too high in their years-long frenzy, even though companies in the industry continue to report growth.

Lam Research, whose equipment and services help make semiconductors, reported gains in profit and revenue for the summer that were slightly stronger than analysts expected, for example. Usually, that helps boost a stock’s price, but Lam Research’s tumbled 11.1 per cent.

It gave a range for its forecast for profit this quarter whose midpoint was slightly below analysts’ expectations. Its stock also came into the day with a 52.4 per cent surge for the year so far, nearly quadruple the already healthy gain for the overall S&P 500, leaving plenty of room for potential disappointment.

Other big tech stocks were unsettled following their own quarterly reports that included at least some encouraging nuggets.

Meta Platforms, which is pushing its Muse AI agent, lost 7.4 per cent after reporting stronger revenue for the latest quarter than analysts expected, though its profit fell short. The company behind Facebook and Instagram also said it’s creating a new class of stock to raise money to pay for AI investments and other expenses.

Tesla slipped 2.1 per cent after flipping between gains and losses in the morning. It reported a stronger profit for the summer than analysts expected, though its revenue was weaker than forecast.

The global tide against AI stocks knocked Nvidia down 4.3 per cent. Because it’s the largest stock on Wall Street by total value, the chip giant was the heaviest weight on the S&P 500.

CoreWeave, which has borrowed money to buy Nvidia’s AI chips that it rents out to customers over the cloud, has been particularly shaky in recent weeks because of worries about its debt. It dropped 9.6 per cent, though it’s swung between wide gains and losses of roughly 4 per cent within each of the last two days.

The weakness for AI and other tech stocks began in Asia, where South Korea’s Kospi tumbled 3.5 per cent, Hong Kong’s Hang Seng dropped 3 per cent and Japan’s Nikkei 225 sank 2.7 per cent.

Also weighing on global stock markets was a jump in oil prices.

The price for a barrel of Brent crude oil rose 2.9 per cent to $US111.99 after touching its highest level in five months. It’s at the high end of the $US97 to $US112 range it’s been yo-yoing through in October on uncertainty about when the war with Iran will allow the global energy industry to return to normal.

In Europe, France’s CAC 40 stock index fell to one of the continent’s sharpest losses with a drop of 1.4 per cent. It has fewer tech stocks than Asian or US indexes, but it was hurt by another jump in yields for French government bonds.

Yields have been generally climbing there because of worries about the government’s big debt load and strained budget. Violent protests across France have raised pressure on the government to increase spending, which could add further to its debt.

Worries about big government debt are weighing on almost every developed economy in the world, including the United States. Such concerns have pushed yields in the US bond market to their highest levels in decades, along with high inflation, signals of a still-strong US economy and other factors.

But US yields nevertheless fell sharply Thursday in a signal that investors were buying US government bonds in search of something safer to own as AI stocks tumbled.

The yield on the 10-year Treasury fell to 4.98 per cent from 5.13 per cent late Wednesday and from more than 5.30 per cent earlier this month. That’s a major move for the bond market, though the 10-year yield remains well above its 3.97 per cent level from before the war with Iran.

Thursday’s drop in yields came even as another report suggested the US economy may be doing better than economists expected. It said fewer US workers applied for unemployment benefits last week, which could signal that layoffs remain low across the country.

That solid economy has helped US companies broadly to make bigger profits, which is what propelled the US stock market to a record high earlier this month despite the many worries tugging at it. The majority of stocks within the S&P 500 rose on Thursday, only to get drowned out by the drops for more influential tech stocks.

Procter & Gamble, Lockheed Martin and CSX were among the latest companies to join the list of those topping profit expectations for the summer, and gains for their stocks helped limit the market’s losses on Thursday.

CEO Shailesh Jejurikar said Procter & Gamble expects “geopolitical and economic challenges” to continue, but it stood by its forecasts for growth in revenue, profit and other measures for the full year. The stock price for the company behind the Crest, Olay and Oral-B brands rose 6.3 per cent.

AP

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