What moved
- US: The Dow rose 1.02% to 52,495.88 and the small-cap Russell 2000 gained 1.65%. The S&P 500 ended the regular session 0.28% higher at 7,712.57, and the Nasdaq Composite was flat, down 0.02% at 26,424.82.
- Europe: The FTSE 100 fell 0.29% to 10,733. The DAX slipped 0.06%, and the CAC 40 and Euro Stoxx 50 each lost 0.38%.
- Asia: Chip-heavy markets did worst. The Kospi fell 2.03%, the Nikkei 225 1.91% and Taiwan 1.74%. The Hang Seng lost 0.81%, and Shanghai rose 0.51%.
Why
The day had two separate drivers. The first was renewed doubt about how the AI boom is being funded and whether it will pay off. That hit memory-chip makers in Asia, and a weak trading debut for Korean AI data-centre company Elice Group added to the selling. The same worry was there at the US open. It explains why technology was the only S&P sector to fall (−0.28%) and why the Nasdaq could not hold its early gains.
The second driver was earnings, and they carried the Dow. RTX, 3M and Northrop Grumman all beat estimates, and 3M and RTX raised their outlooks. Shareholders were more selective than the headline beats suggest, though. Companies were rewarded for guidance and punished for rising costs, not paid simply for beating forecasts.
Oil swung within the day. Brent rose above $110 after Houthi attacks on Saudi targets. It then eased on reports of a US-backed compromise proposal that Iran had preliminarily accepted, and finished 0.53% lower at $108.97. Treat that story with care, because the proposal is unconfirmed. Timing matters too: the S&P's high for the day came before oil fell, so the diplomacy reports steadied the afternoon rather than drove the rally. Long-dated Treasuries gained, with the 30-year yield down 4.7bp and the 10-year down 1.9bp, while the 5-year rose 0.6bp.
Sentiment & risk appetite
The tape was defensive rather than risk-on. Health care (+2.37%), real estate (+1.70%) and utilities (+1.26%) led the US sectors, while technology came last. The VIX, a gauge of expected US stock volatility, fell 1.13 points to 17.31. Its bond-market equivalent, the MOVE index, edged up to 101.7. Gold slipped 0.46% and the dollar index 0.27%, so there was no rush into safe havens. Breadth was weaker in Europe: on PrimerIQ's own count, 1,633 European listings rose and 2,015 fell, and in the UK 307 rose against 491 that fell.
Economic calendar
UK unemployment fell to 4.7% from 4.9% in the three months to August, and payrolled employment rose by 13,000 in September. Sterling gained 0.54% to $1.3381 as traders raised the odds of a Bank of England rate rise in November. China's central bank left its loan prime rates unchanged for a 17th month, because stronger-than-expected third-quarter growth reduced the need to ease policy. French government bonds came under pressure, with the 10-year yield rising to 4.94%. No major US data moved markets today.
On Wednesday, UK September inflation is due at 07:00 BST, and the Bank of England's Andrew Bailey and the European Central Bank's Christine Lagarde are both scheduled to speak. US jobless claims and a Bank of Korea rate decision follow on Thursday, and flash PMIs (monthly business surveys) are out on Friday.
Earnings
GE Aerospace beat estimates with earnings per share of $2.25 against $2.02 and raised its guidance. Even so, the shares were down about 4% in the morning on higher costs and weaker free cash flow. General Motors also beat but fell about 5% after narrowing its full-year profit range. After the close, Netflix reported earnings per share of 87 cents against its own 82-cent forecast but cut its 2026 advertising revenue outlook to about $2.7bn from about $3bn, and the shares are about 4% lower after hours.