Intel and Amazon revive AI spending fears as Nasdaq slides 2.86%

• US: The Nasdaq fell 2.86% to 25,437.00, its steepest one-day drop since early June by Reuters' count. The S&P 500 lost 1.82% to 7,580.07 and the Dow 1.09% to 51,770.31. The Nasdaq now sits 8.25% below its 52-week high.
• Europe: Losses were concentrated in tech. The Euro Stoxx 50 fell 1.22% and the DAX 0.85%, while the CAC 40 was flat (-0.01%) and the FTSE 100 edged up 0.07% to 10,729.78.
• Asia: Chip-heavy markets took the worst of it. The Kospi fell 4.69%, Taiwan 3.88%, the Shenzhen Component 5.57% and Shanghai 2.24%. The Nikkei lost 1.04%, but the Hang Seng rose 0.86%.

This morning's explanation held up through the close. Intel's outlook fell short of estimates, and Amazon's continued heavy spending brought back the question that has hung over this rally: when do the AI infrastructure bills turn into profits? Intel's shares collapsed, and the damage spread across chipmakers and server makers. The S&P technology sector fell 4.89%, compared with a 1.91% gain for energy and 1.41% for consumer staples. Selling followed one rule: companies that missed or guided cautiously were punished hard.

This built on Thursday's damage. Alphabet fell 12.64% that day, and software was hit by ServiceNow (-26.95%) and Fortinet (-20.09%), both on disappointing results or outlooks. Three sessions in a row of large tech names repricing lower explains why Friday's sell-off was so heavy.

Asia sold off first and hardest. The Kospi and Taiwan are dominated by chip suppliers to US AI spenders, so they react most directly to doubts about that spending. Hong Kong's rise has no clean explanation. In Europe, our tech sector median fell 2.56%, while defensives rose. That rotation, together with weaker UK financials (median -1.17%), explains the FTSE's flat finish.

The VIX rose to 19.42 from 17.20, a clear jump in nerves but well short of panic. Rates volatility rose too, with the MOVE index up 7.12% to 100.20. Treasuries rallied: the 5-year fell 8bp and the 10-year 6bp to 4.93%. Gold did not act as a safe haven, falling 3.61% to $3,885.70, and the dollar index slipped 0.12%. Breadth was poor, especially in Asia, where 2,706 of our listed names rose and 9,846 fell. In Europe 1,395 rose and 2,330 fell (PrimerIQ's universe, not exchange figures).

Today's main US release, the Q3 employment cost index at 08:30 ET, rose 0.8%. That was in line with forecasts and slightly slower than Q2's 0.9%. It eases the wage side of the inflation story a little. Thursday's September PCE data was hotter, with headline inflation at 3.6% a year and core at 3.1%. On Wednesday the Fed held rates at 3.75%–4.00%, with two policymakers voting for an immediate hike. Overnight, the Bank of Japan held at 1.25% by an 8–1 vote, with one member pushing for a hike. Fed officials are speaking again now that the pre-meeting quiet period has ended.

Oil majors were the bright spot. Chevron earned $5.28 a share against $4.87 expected, and Exxon $4.23 against $4.04, and both stocks rose as high prices widened margins. Regeneron beat strongly, at $20.07 against $16.25. Colgate and General Dynamics also came in ahead, but against the tech sell-off, beats outside tech barely registered.