Market Overview
US stocks began November on a divided footing as concerns about funding artificial intelligence infrastructure weighed on technology shares. The Nasdaq and S&P 500 fell, while gains in industrial and consumer-facing stocks lifted the Dow. Oil prices dropped as signs of renewed US-Iran diplomacy eased supply concerns. In Australia, attention turns to Tuesday’s Reserve Bank decision; the AFR reported that a rate rise to an 18-year high was widely expected. US midterm elections and Friday’s jobs report are the next major events this week.
Markets
In US equity markets, the tech-heavy Nasdaq Composite (^IXIC) dipped 1.07% to close at 25,164.32, while the S&P 500 (^GSPC) shed 0.51% to finish at 7,541.40. Bucking the trend, the Dow Jones Industrial Average (^DJI) outperformed, rising 0.41% to close at 51,983.98.
Commodity markets saw significant movements, with Brent Crude (BZ=F) tumbling 11.47% to $104.15 per barrel. WTI Crude (CL=F) pulled back 7.77% to settle at $96.03 per barrel.
In currency markets, the AUD/USD (AUDUSD=X) declined 0.40% to 0.6999. Australian shares are “set to rise,” according to S&P/ASX 200 futures, which were up 0.7 per cent, or 60 points, to 8926 near 7am AEDT, as reported by AFR, indicating an anticipated positive open for the local market ahead of the Reserve Bank board meeting.
US Treasury yields eased, with the 10-Year US Treasury (^TNX) yield falling 3.50 basis points to 4.894%, and the 30-Year US Treasury (^TYX) yield declining 4.00 basis points to 5.269%.
What Drove Markets
The US tech sector extended its sell-off, as investors focused on the “price and financing of the AI buildout,” rather than questioning the long-term demand for AI, according to King Lip, chief strategist and partner at BakerAvenue Wealth Management. This was underscored by Oracle’s plans for significant stock and bond offerings to fund its AI infrastructure. Investing.com reported that an amended Anthropic regulatory filing disclosed approximately US$895.4 billion in commitments tied to compute capacity and data centre partnerships. Recent earnings reports had added to concerns about AI spending, cash flow and chip supply, although Monday’s share-price performance was mixed: Amazon rose while Meta Platforms, Alphabet and Intel fell.
Amid the tech rout, capital rotated into “old economy” and defensive stocks. Gains in companies such as Sherwin-Williams and Home Depot helped propel the Dow Jones Industrial Average higher. This shift was also evident in October, when defensive S&P sectors, including consumer staples, utilities, and health care, were the top three performers. An equal-weighted version of the S&P 500 surged 4.9% for October, marking its largest monthly outperformance versus the cap-weighted S&P 500 index since March 2009, as noted by Adam Turnquist, chief cross-asset strategist at LPL Financial.
Oil prices recorded their largest daily drop since July, plummeting on growing hopes that the US and Iran might resume peace talks. US Secretary of State Marco Rubio indicated a preference for a peaceful resolution, while Iranian state media reported that the Supreme Leader had granted “certain authorities” to pursue dialogue with the US. Mediated discussions between Qatari and Iranian officials also supported efforts to de-escalate hostilities in the Gulf.
Stocks to Watch
Several key companies saw significant movements reflecting the prevailing market themes. Marvell Technology (MRVL) shares dropped 12.72% to $171.41 after announcing it would acquire Lumentum (LITE), whose shares shed 18.59% to $684.40. Oracle (ORCL) declined 8.76% to $119.22 following its plans for a $10 billion common stock sale and $10 billion in bond offerings to fund its AI buildout, underscoring investor concerns about AI financing. Intel (INTC) fell 8.80% to $59.97. Its recent results had highlighted sluggish demand for PC processors and supply-chain problems affecting data centre chips.
Conversely, some “old economy” stocks posted strong gains. Sherwin-Williams (SHW) rose 5.94% to $352.37, and Home Depot (HD) climbed 3.63% to $341.15, contributing to the Dow’s positive performance. Among the mega-cap tech names, Apple (AAPL) closed 1.83% lower at $338.32 ahead of its scheduled after-hours earnings release, while Meta Platforms (META) dipped 1.34% to $606.73 amid considerations of significant bond offerings for AI following its first quarterly negative free cash flow in over a decade. Amazon (AMZN), however, climbed 2.20% to $245.63, despite lingering concerns about negative free cash flow and heavy AI spending.