Wall Street Highlights: S&P 500, Nasdaq Rotation Hits AI Winners On Spending Worries

The record plunge in Alphabet Inc. shares on disappointing sales revived doubts over the artificial-intelligence trade. The Nasdaq 100 lost 1.4%. Microsoft Corp. drew blowout demand for its $25 billion debt offering. In late hours, Amazon.com Inc. slumped as its spending soared on efforts to meet demand for AI services. Intel Corp.'s revenue forecast missed estimates.

Not every tech firm fell, but a basket of AI winners sank 2.7%. In a sign of rotation, over 400 shares in the S&P 500 rose.

Thursday's price action was a "microcosm" of what the stock market has experienced for much of October: Concerns about the AI trade weighing on technology and communication services, but leaving other areas relatively unscathed, said Chris Larkin at E*Trade from Morgan Stanley.

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Tech losses revived the haven appeal of Treasuries, with short-dated notes outperforming. Oil wavered as traders parsed conflicting signals on the direction of US military strategy in Iran.

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Just a day after the Federal Reserve left rates steady, data showed the US economy expanded in the third quarter at the fastest pace in a year. Meanwhile, the personal consumption expenditures price index - the Fed's preferred inflation measure - rose 0.5% in September, the most in six months.

"It was another strong round of economic data that shows ongoing inflationary pressures and growth split between the AI buildout and consumption," said Ian Lyngen at BMO Capital Markets.

AI is still the major theme for activity, but economic resilience is still a broad-based story, according to Eli Nir and Oscar Munoz at TD Securities.

"Couple that with the AI-led inflationary pressures, and it's clear why the Fed both upgraded its growth assessment and remained acutely focused on their inflation mandate," they added.

White House National Economic Council Director Kevin Hassett hinted that he expected the Fed would raise rates if inflation figures for this month are elevated.

"If October comes out really high, then I think the Fed would probably appropriately act," he told Bloomberg Television.

Elsewhere, European Central Bank President Christine Lagarde played down the danger that inflation will spread beyond energy after news that she'll step down early overshadowed a decision to leave rates untouched.

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Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.3% as of 4 p.m. New York time
• The Nasdaq 100 fell 1.4%
• The Dow Jones Industrial Average fell 0.3%
• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.2% to $1.1172
• The British pound rose 0.4% to $1.3376
• The Japanese yen was little changed at 157.73 per dollar

Cryptocurrencies

• Bitcoin fell 1.3% to $80,227.45
• Ether fell 2.1% to $2,309.16

Bonds

• The yield on 10-year Treasuries declined eight basis points to 4.94%
• Germany's 10-year yield declined two basis points to 3.36%
• Britain's 10-year yield declined three basis points to 5.29%

Commodities

• West Texas Intermediate crude rose 0.1% to $102.90 a barrel
• Spot gold fell 0.9% to $4,029.47 an ounce