.png){kind=logo}
Global equity indices retreated on October 9 as investors reassessed market valuations following a strong rally driven by enthusiasm for AI. As of mid-day trading in New York, the S&P 500 declined 0.2% to approximately 6,740, the NASDAQ 100 fell 0.3%, and the Dow Jones Industrial Average dropped by 0.3%.
The Russell 2000 Index also slipped 0.2%, reflecting a broader market pullback. In Europe, the Stoxx Europe 600 fell 0.4%, while the MSCI World Index also declined by 0.3%.
The Bloomberg Magnificent 7 Total Return Index dropped by 0.4%, indicating that the AI-led mega-cap portfolio is starting to slow down. Analysts are concerned that the breadth of the markets is weakening and that an overbought condition is evident, as noted in leading technology names.
Despite these indications, investors continue to adopt a dip-buying approach, maintaining the longer-term trend since the market's bailout in April.
Bond yields edged higher as markets prepared for upcoming earnings reports. The yield on the US 10-year Treasury rose two basis points to 4.13%. Similar moves were observed in Europe, with Germany’s 10-year yield climbing to 2.70% and the UK’s rising to 4.75%.
The Bloomberg Dollar Spot Index advanced 0.3%, signaling stronger demand for the US currency. Major peers weakened against the dollar, with the euro down 0.6% to $1.1563 and the British pound falling 0.7% to $1.3313. The Japanese yen dropped 0.2%, trading at 153 per dollar.
In cryptocurrencies, Bitcoin fell 1.3% to $121,348.64, while Ether dropped 4% to $4,322.49. Traders cited a broader risk-off sentiment and consolidation in the tech sector as contributing factors.
Commodities also faced pressure. West Texas Intermediate crude slipped 0.9% to $61.99 a barrel. Spot gold declined 0.6% to $4,019.39 per ounce. However, silver reached $50, a level not seen since the 1980 Hunt Brothers’ squeeze, highlighting divergence in precious metals.
The AI market continues to generate equity returns, yet the sustainability of this trend is increasingly controversial among investors. The Magnificent Seven have increased by about 260% ever since the release of ChatGPT in 2022. UBS and Morgan Stanley analysts noted that, despite the continued high levels of spending on AI, questions of overvaluation and circular investments persist.
UBS recommends balanced exposure across software, hardware, and semiconductors, suggesting the rally is still underpinned by accelerating adoption. Meanwhile, Morgan Stanley emphasized that today’s leading AI firms have real earnings, contrasting them with the dot-com era.
Corporate activity in the AI space remains strong. NVIDIA received US approval for chip exports to the UAE. Google launched its Gemini Enterprise AI platform, increasing competition with Microsoft and OpenAI. Intel unveiled new products essential to its recovery plan.
Additional corporate highlights include better-than-expected results from Delta, PepsiCo, and Costco. Tesla faces fresh US regulatory scrutiny, and Ferrari shares fell after issuing cautious guidance for its EV rollout. Investors remain focused on upcoming earnings and potential mergers and acquisitions.
