What moved
- US (closed Thursday): The Nasdaq Composite fell 1.38% to 26,184.73. The S&P 500 lost 0.30% to 7,720.39 and the Dow 0.25% to 52,342.60. Futures are the only live read: S&P 500 futures are down 0.88% and Nasdaq 100 futures 1.99%.
- Europe (closed Thursday): Europe ignored the tech worry. The DAX rose 1.31% to 26,039.68, the CAC 40 1.05% to 7,970.00, the Euro Stoxx 50 0.64% to 6,207.07 and the FTSE 100 0.26% to 10,722.07.
- Asia (Friday): Asia's chip-heavy markets took the brunt. The Kospi closed 3.48% lower at 5,730.74, Taiwan 2.49% lower at 45,211.83 and the Nikkei 2.12% lower at 63,290.11. Hong Kong went the other way: the Hang Seng is trading 1.49% higher at 23,301.57. The Shanghai Composite has fallen 1.44% to 3,599.02.
Why
Alphabet is the story. It sold off by around 13% on Thursday after a third quarter in which revenue grew strongly but capital spending roughly doubled year on year to about $51bn. That pushed free cash flow to minus $9.07bn, the second quarter in a row of cash outflow. Alphabet also kept its full-year capex guidance of $195–205bn. Investors have tolerated huge AI budgets as long as the cash kept coming in. A large tech company now spending more than it generates reopens the question of when that spending pays off. Microsoft showed the contrast: strong cloud growth and positive cash flow lifted its shares.
Results after the US close made things worse. Amazon fell about 7% after hours as its capex also climbed, and Intel fell about 23% on weak fourth-quarter guidance. That explains why Nasdaq futures are down further. It also explains Asia: Korea and Taiwan depend most on the chips and memory that feed AI data centres, and the Kospi fell hard enough to trigger a trading curb. In Japan the Bank of Japan held rates and said inflation is broadly at its 2% target, which leaves a December rise in play. It also plans to speed up sales of the stock funds (ETFs) it holds, which weighed on the Nikkei. In Hong Kong, gains in internet platform shares outweighed losses in chipmakers.
The economic data took a back seat. US growth ran at a 3.4% annualised pace in the third quarter, beating the 3.2% forecast, and September PCE inflation (the Fed's preferred measure) was 3.6%. That is not obviously an argument for lower rates, yet Treasuries rallied anyway, with buyers seeking safety. On Wednesday the Fed held rates at 3.75–4.00%, with two officials voting for a rise; on Thursday the ECB also held but warned about energy costs. In Europe, solid company results and reports of progress on Iran talks drove the gains.
Sentiment & risk appetite
This was a narrow sell-off concentrated in tech, not a broad exit from shares. In the US, health care rose 2.40% and real estate 2.21%, while communication services fell 1.87% and technology 1.18%. Across PrimerIQ's US universe, 3,586 shares rose and 2,453 fell, and the Russell 2000 of smaller companies gained 1.01%. Asia was the opposite: on Thursday 9,832 of our Asian listings fell against 2,996 that rose, with technology's median move at -3.68%. The VIX, Wall Street's measure of expected volatility, has risen 1.23 points to 18.43. Money went to bonds rather than gold: the 10-year Treasury yield fell 5.6bp to 4.989% and the 5-year 7.0bp, while gold has slipped 0.95% to $3,993.30. The yen has firmed slightly, with dollar/yen down 0.25% at 157.44.
Economic calendar
No major UK economic data has been released this morning. The UK's next GDP figures are due on 12 November. Sterling has risen 0.62% to $1.3411, helped by a weaker dollar (the dollar index is down 0.24%). The Bank of Japan's decision to hold rates came out during the Asian session.
The main data still to come is the eurozone's first estimate of third-quarter GDP at 10:00 GMT (11:00 CET), alongside the flash October inflation estimate. Both will feed into whether the ECB raises rates in December. The US third-quarter employment cost index, a measure of wage pressure the Fed watches closely, is due at 12:30 GMT (08:30 EDT). Oil remains volatile: WTI is trading 1.31% higher at $103.34, with Brent at $112.50. Middle East supply risk remains the swing factor after an attack on a tanker in the Strait of Hormuz.
Earnings
The biggest results overnight came after the US close on Thursday: Amazon fell about 7% after hours and Intel about 23%, as covered above. In Europe this morning, Sanofi beat expectations and raised its full-year guidance, CaixaBank lifted its fees guidance and Crédit Agricole's net income missed. Exxon Mobil and Chevron report before the US open.