Meta-led AI sell-off sinks Nasdaq 2.6% as Treasuries rally and oil climbs

• US (closed Thursday): The S&P 500 ended 1.21% lower at 7,663.43 and the Nasdaq Composite fell 2.6% to 26,008.86. The Dow finished flat, up 0.02%. Futures are the only live read on the US: S&P 500 futures are unchanged and Nasdaq 100 futures are up 0.27%, so neither the sell-off nor a rebound has carried on overnight.
• Europe (closed Thursday): The Euro Stoxx 50 lost 1.94%, the CAC 40 1.39% and the DAX 1.07%. The FTSE 100 fell only 0.26%, to 10,725.03.
• Asia (still trading): The Nikkei 225 is down 0.41%, having been much lower earlier in the session. The Hang Seng is up 1.15%, the Shenzhen Component is up 2.27% and Shanghai is up 0.48%. The Kospi is flat, down 0.07%.

The sell-off started with Meta. Its profit came in below forecasts, it signalled heavier spending on AI, and it said it would create a new class of shares to help pay for that spending. The selling spread across the AI trade, and chip-equipment makers took the worst of it: Lam Research ended 11.76% lower and KLA 9.55%. Investors are worried on two counts. They doubt that the huge sums going into data centres will pay off, and high borrowing costs make it more expensive to build them and buy the chips. Tesla also fell despite beating forecasts, because it raised its spending plans for 2027 and 2028.

Treasuries rallied as money moved out of tech and into safer assets. The 10-year yield fell 19.3bp to 4.953% and the 5-year 20.4bp. The rally did not come from weak data: weekly US jobless claims fell to 194,000, a sign that layoffs remain low. Lower yields helped rate-sensitive sectors such as utilities and property, which is why the Dow held flat.

Oil is the other strain on markets. Brent is up 1.15% at $114.47. The rise follows new Houthi attacks on Saudi Arabia and reports that the US and Israel have plans for renewed strikes on Iran after the 3 November midterm elections. Dearer oil feeds the inflation worries that have kept bond yields high. Hong Kong and mainland China are rising after a heavy tech sell-off there on Thursday. We found no specific news behind the bounce, so it looks like buyers stepping back in after the drop.

The VIX, Wall Street's main gauge of expected stock-market swings, rose from 16.68 to 19.03. The MOVE index, its equivalent for Treasury bonds, jumped 11.36% to 106.84, a sign that nerves are building in bonds as well as stocks. In the US the selling was narrow. Across PrimerIQ's listed universe, 2,954 US shares rose and 3,043 fell, and the average stock gained 0.36%. The tech sector fund (XLK) lost 3.29% while the consumer staples fund (XLP) gained 3.31%: money moved between sectors rather than leaving the market. Europe and Asia saw broader selling, with 1,310 risers against 2,456 fallers in Europe and 2,920 against 9,955 in Asia on our count. Safe havens gave a mixed signal. Treasuries rallied and the yen strengthened, with USD/JPY down 0.74% at 156.96. But gold fell 0.59% to $4,036.40 and bitcoin dropped 2.67%.

UK retail sales volumes fell 0.4% in September, according to figures published at 07:00. Economists had expected a 0.1% fall, and the annual growth rate slowed to 0.8% against a forecast of 1.0%. The picture is better over a longer period: August was revised up to growth of 0.7%, and volumes rose 0.7% across the third quarter as a whole. Unusually warm weather hurt sales of clothing and autumn ranges, while fuel volumes rose despite higher pump prices. A consumer confidence survey published overnight also showed a sharp fall. Sterling has barely moved, with GBP/USD at 1.3394 and EUR/GBP slightly lower at 0.8374.

Still to come today are the first (flash) October readings of purchasing managers' indices (PMIs), monthly surveys of business activity: the eurozone at 09:00 BST, the UK at 09:30 BST and the US at 14:45 BST. The final University of Michigan consumer sentiment reading follows at 15:00 BST. It is expected at 46.3, down from 48.1, and its one-year inflation expectations figure matters more than usual while oil is this high.

Meta's results set the tone for the whole market, as explained above. TTM Technologies, a circuit-board maker, beat revenue and earnings forecasts and raised its full-year sales guidance, but its shares fell 27.67%. Some data-centre revenue was pushed back by customers' programme timing, and the company announced a further $400m of capacity spending. Spotify rose 11.10% after its results. None of the companies reporting today has published results yet.