U.S. equities are under renewed pressure Thursday morning as the AI-related selloff deepens despite a sharp decline in Treasury yields. At roughly 4:05 a.m. ET, Dow futures were up 0.39%, S&P 500 futures were down 0.35% and Nasdaq 100 futures were down 1.26%. Wednesday, the S&P 500 fell 1.11%, Nasdaq dropped 1.88%, Dow slipped 0.09% and Russell 2000 declined roughly 1.9% after hotter-than-expected inflation revived Fed-hike concerns and accelerated selling in highly valued, capital-intensive AI names.
Wednesday’s catalyst was a hotter September inflation report. Headline CPI increased 0.6% month over month and 3.7% year over year, while core CPI rose 0.3% versus the 0.2% consensus and 2.6% from a year earlier. Gasoline was the largest contributor to the headline increase, but gains in shelter, airfares and other goods heightened concern that inflation pressure is broadening beyond energy.
Treasuries ultimately rallied despite the inflation surprise. On your supplied closing tape, the 2-year yield rose 2 basis points to 4.81%, while the 10-year fell 3 basis points to 5.19% and the 30-year declined 4 basis points to 5.52%. Safe-haven demand has intensified overnight, pushing the 10-year toward 5.09% and the 30-year near 5.43% this morning. Markets now price roughly a 27% probability of an October Fed increase and a 67% probability of a quarter-point increase in December. The decline in yields is therefore less a dovish Fed signal than a risk-off response to growing concerns about AI investment and economic sensitivity to tighter financial conditions.
The dollar strengthened Wednesday, with the DXY rising 0.34 to 102.53. The euro fell 0.39% to $1.1156, sterling declined 0.48% to $1.3192, USD/JPY rose 0.03% to ¥158.37, and EUR/JPY fell 0.36% to ¥176.67. Those moves are reversing this morning as Treasury yields retreat: the DXY is down toward 102.0, while both the euro and sterling are rebounding roughly 0.5%.
Commodity markets are also reversing Wednesday’s moves. November WTI rose $0.95, or 1.01%, Wednesday to $95.09, while December gold fell $56.20, or 1.35%, to $4,121.10. WTI is down roughly 2% this morning near $93.75 as markets consider the possibility of additional Russian crude reaching global markets and easing freight constraints. Gold is rebounding more than 1%, with U.S. futures near $4,178, supported by the weaker dollar and sharp decline in Treasury yields.
Today’s economic calendar is unusually heavy following Wednesday’s CPI surprise. September PPI, retail sales and weekly initial jobless claims are due at 8:30 a.m. ET, along with additional regional business surveys later this morning. Jobless claims are expected around 195,000-200,000 versus 197,000 last week. PPI will be watched for evidence that higher fuel, freight and input costs are moving through producer margins, while retail sales will test whether consumers are maintaining spending despite declining real purchasing power.
Sector Highlights
Wednesday’s selling was broad but heavily concentrated in growth. Health Care +2.44% and Consumer Staples +2.38% were the only sectors to post meaningful gains, followed by Energy +0.80%. The remaining sectors declined, including Utilities -0.31%, Materials -0.44%, Financials -0.61%, Real Estate -0.82%, Industrials -0.96% and Consumer Discretionary -1.10%. Technology -2.62% and Communication Services -1.73% were the clear laggards. Breadth was deeply negative, with declining stocks outnumbering advancers 3.05:1 on the NYSE and 3.43:1 on the Nasdaq, confirming that the weakness extended well beyond a handful of AI stocks.
Information Technology
- Nvidia (NVDA) is down roughly 1.3% premarket, while Micron Technology (MU) is off about 4% and AMD roughly 1.9%, extending the semiconductor selloff. The group remains caught between exceptionally strong AI demand and the market’s increasing focus on capital costs, financing and returns on AI infrastructure investment.
- TSMC reported a 69% year-over-year increase in third-quarter net profit to a record T$763.1 billion, beating expectations, and expects fourth-quarter revenue of $52.3-$54.3 billion, up as much as 61% from a year earlier. Management said AI demand remains “extremely robust” and still exceeds available capacity, while raising expected 2026 revenue growth to roughly 44%. However, the company also emphasized a more cautious planning stance for 2027 because of macroeconomic uncertainty, which is contributing to this morning’s weakness in U.S. semiconductor shares despite the exceptional headline results.
- Apple (AAPL) is an important positive read-through from TSMC’s results alongside Nvidia. TSMC remains a major supplier to both companies, and continued tightness in advanced-process and packaging capacity reinforces the fundamental strength of high-end semiconductor demand even as equity valuations reset.
- Oracle (ORCL) is down roughly 2% premarket after falling nearly 9% Wednesday. Oracle and CoreWeave have become focal points for concern around debt-funded AI expansion, with their bond yields reaching record highs during Wednesday’s selloff. Higher financing costs are forcing investors to distinguish increasingly between cash-rich hyperscalers and AI infrastructure companies reliant on substantial external borrowing.
- Dell Technologies (DELL) remains under pressure after falling 11.4% Wednesday following a Barclays downgrade to Equal Weight. The shares had quadrupled earlier this year, making Dell particularly exposed to a valuation reset as investors reconsider whether the returns from AI-server investment can keep pace with rapidly rising capital requirements.
Financials
- PNC Financial Services (PNC) reports third-quarter results this morning, with its conference call scheduled for 10:00 a.m. ET. PNC entered the quarter expecting average loans to increase 1%-2% sequentially and net-interest income to rise 3%-3.5%, while fee income was expected to decline. Loan growth, deposit costs, credit quality and the impact of higher long-term yields should be the principal focus.
- The broader banking sector remains mixed after this week’s results. JPMorgan Chase (JPM) and Bank of America (BAC) both missed profit expectations, while other major banks exceeded estimates but received limited market reward. Equity trading remained strong, but fixed-income trading and investment-banking activity softened as higher Treasury yields and market volatility delayed deals and IPOs. Consumer banking and net-interest income remained comparatively resilient.
Real Estate
- Prologis (PLD) reports third-quarter results today, with management holding its conference call at 12:00 p.m. ET. Industrial leasing activity, occupancy, rent growth and development will be important, but investors should also focus on Prologis’ expanding data-center development business and the cost and availability of capital. Those issues are particularly relevant as the AI-infrastructure trade becomes increasingly sensitive to financing conditions.
Health Care
- Eli Lilly (LLY), AbbVie (ABBV) and Amgen (AMGN) helped drive Wednesday’s sharp defensive rotation into Health Care as investors moved away from high-duration Technology. Health Care finished 2.44% higher on your supplied tape while Technology fell 2.62%, illustrating an increasingly pronounced shift toward companies whose earnings outlooks are less dependent on borrowing costs and the AI capital-spending cycle.
Consumer / Defensive Leadership
- Defensive leadership extended beyond Health Care. Consumer Staples rose 2.38% Wednesday, while Consumer Discretionary declined 1.10%. With September inflation now running at 3.7% and real wage pressure increasing, investors are increasingly rewarding businesses with recurring demand and relatively stable cash flows while reducing exposure to more rate- and valuation-sensitive areas of the market.
