Two worries hit Wall Street on the same day this week: prices are rising faster than expected, and some of the companies building artificial intelligence infrastructure may be borrowing too much to do it.
On Wednesday, according to CNBC, the S&P 500 fell 1.11% to 7,718.94. The Nasdaq Composite lost 1.88% to close at 26,692.87. The Dow Jones Industrial Average was nearly flat, down 48.62 points, or 0.09%, at 51,621.48.
Inflation surprises again
Reuters reported that hotter-than-expected inflation data drove the sell-off. It said the data raised concern that the Federal Reserve may have to raise interest rates further to bring prices under control. AI stocks that depend on cheap borrowing took the worst of it.
The producer price report on Thursday added to the pressure. According to MarketScreener, it confirmed that inflation is accelerating. Schwab reported that core producer prices, which exclude food and energy, rose 0.7% last month against expectations of 0.3%. Schwab described that as the biggest gain in four years. Headline wholesale prices rose 1.3%, which Schwab called the second-largest monthly increase on record.
Schwab’s analyst suggested that high energy costs appear to be spreading into other categories, airfares among them.
Traders reacted by changing their view of the Fed. MarketScreener said the market briefly put the chance of another rate hike in late October at nearly 50%. Later in the day, expectations fell back to about 30%. So a hike is not the base case, but it is no longer remote.
CoreWeave at the centre
The sharpest single move was in CoreWeave, which rents out computing power for AI work. Its shares fell more than 15% on Wednesday, according to CNBC. MarketScreener, citing a Bloomberg report, said the company’s unsecured bonds due in 2032 were trading at levels normally linked to distressed debt, with yields above 15%.
The weakness spread. MarketScreener listed Oracle down about 9%, Nebius down 10% and Dell down 12%. CoreWeave was down another 6% in early trading on Thursday.
CNBC said the day’s mood reflected concern about technology companies outside the so-called Magnificent Seven using too much debt to fund the AI build-out. Chip stocks, already weak, slipped further. Micron fell 4%, Advanced Micro Devices and Sandisk each dropped more than 5%, and Intel lost 4%.
Not every large tech name fell. One report noted that Apple reached a $5 trillion market value during the volatile session. That figure comes from a crypto-news outlet, so treat it with some caution.
Banks add to the mix
Bank of America shares fell almost 5% after third-quarter revenue missed expectations, CNBC reported. The bank also faces more than $1.2 billion in federal penalties. Regulators say it failed to report more than $5 billion in suspicious transactions. Morgan Stanley’s results beat expectations, though CNBC said its stock still ended lower.
A rotation on Thursday
By Thursday’s close, CNBC said, the picture was mixed. The Dow added 556.21 points, or 1.08%, to finish at 52,177.69. The S&P 500 gained 0.33% to 7,744.06. The Nasdaq edged up 0.08% to 26,713.03 after being down as much as 1.4% earlier. CNBC attributed the Dow’s gain to investors moving out of AI stocks and into companies seen as better value, while they weighed data pointing to persistent inflation.
Not everyone is alarmed. CNBC quoted one market strategist, Blancato, who said he was not overly concerned about stocks or bonds. He views the rise in inflation as transitory and thinks much of it is already priced in. The producer price figures, with their record-scale monthly jump, make that view harder to hold, and the data do not settle it either way.
Why it matters beyond the trading floor
Rate-hike bets feed through to everyday borrowing. Higher expected Fed rates tend to keep mortgage, car loan and credit card costs elevated. Wholesale price jumps often reach shelf prices later, so shoppers and travellers may feel it with a delay.
Savers and retirement investors are exposed too. Stock indexes have leaned heavily on AI-linked companies this year, and many 401(k) and pension funds hold them through broad index funds. When the financing behind those companies looks shaky, the effect is not limited to the firms themselves.
Key points to watch are the Fed’s late-October meeting, the next round of inflation readings and whether CoreWeave’s borrowing costs keep rising. Those will show whether this week was a short scare or the start of a harder stretch for rate-sensitive stocks.