What moved
- US: S&P 500 futures are trading 0.46% lower at 7,669 and Nasdaq 100 futures are down 0.33%. Futures are the only live read on the American day. In Thursday's cash session the Nasdaq Composite ended 2.6% lower at 26,008.86 and the S&P 500 closed 1.21% down at 7,663.43, while the Dow finished flat at 52,867.98.
- Europe: Losses have deepened since the open. The DAX is down 0.93%, the CAC 40 is off 0.78%, the Euro Stoxx 50 is 0.75% lower and the FTSE 100 has shed 0.59%.
- Asia: The region closed mostly steadier. The Hang Seng ended 0.69% higher, Shanghai rose 0.89% and Shenzhen gained 2.79%, while the Nikkei finished 0.34% lower.
Why
Thursday's sell-off was a verdict on the cost of the AI build-out, not on whether it happens. Meta's results and spending plans revived fears that the largest tech companies will borrow heavily to fund data centres. Chip-equipment makers took the worst of it: Lam Research fell 11.76% and KLA 9.55%. The same worry shows up pre-market, where Western Digital is lower despite beating forecasts. Once investors start pricing financing risk rather than growth, the most capital-hungry, richly valued stocks reprice first. That is why the Nasdaq fell twice as far as the S&P while the Dow barely moved.
Oil is the second front. Brent reached a five-month high near $114 overnight. Houthi attacks on Saudi energy sites and reports that the US and Israel are planning renewed strikes on Iran drove it there. It has since eased to $110.15, while WTI is up 1.71% at $101.17. Dearer energy feeds inflation, and that matters because the Fed is leaning towards raising rates. Traders still put the odds of a December rate rise at roughly 85%, down from fully priced earlier in the week, after Thursday's rush into Treasuries. The 10-year yield is 1.9bp higher this morning at 4.972%.
Europe has problems of its own. Unrest and a budget standoff are still weighing on French bonds. Kering lost more than 10% after weak Gucci sales, which dragged on luxury stocks.
Sentiment & risk appetite
Yesterday's tape was narrower than the index drop suggests. The technology sector fund (XLK) fell 3.29%, while consumer staples rose 3.31% and utilities 2.07%. PrimerIQ's breadth count across our US universe was almost even: 2,957 advancers against 3,060 decliners, with the average stock up 0.34%. That points to money rotating into defensive sectors, not wholesale selling. Fear gauges are firmer. The VIX is at 19.94, up 4.78%, and the MOVE index of bond volatility closed 11.36% higher at 106.84. The yen is the safe haven of choice, with the dollar down 1.13% at 156.35 yen. Gold offers no shelter: it is 0.42% lower at $4,043.20.
Economic calendar
Nothing of consequence printed at 08:30 ET; the US data comes later. S&P Global's flash October PMIs are due at 09:45 ET, with services expected at 57.9 (from 58.8) and manufacturing at 55.4 (from 55.9). The final University of Michigan sentiment reading follows at 10:00 ET, forecast at 46.3 (from 48.1). Its one-year inflation expectations gauge, seen at 4.7% (from 4.6%), is the number the rate-hike debate will focus on. Europe's flash PMIs came out this morning, and French business activity unexpectedly shrank in October. Thursday's US jobless claims fell to 194,000, a sign that layoffs remain low.
Earnings
American Express beat forecasts, with adjusted earnings of $4.68 a share against $4.47 expected, and raised its full-year profit forecast. Even so, the shares are lower pre-market, a familiar pattern for the stock after a beat. SLB edged past estimates at $0.64 a share against $0.62. The tone was set on Thursday, when TTM Technologies fell 27.67% despite topping forecasts and raising guidance, as investors focused on heavier capital spending.