US equities edged lower Friday as investors continue to digest the impact of a global software outage at Microsoft Corp. and turmoil at Nvidia Corp., even as wholesale inflation data helped ease fears of an outsized interest-rate hike.
The S&P 500 Index is lower by 0.4%, while the tech-heavy Nasdaq 100 fell 0.9% as of 9:55 a.m. in New York.
The producer price index rose 0.3% in October over the previous month and 6.5% over the previous year, the fastest pace in four years, but slightly below expectations. That helped take some air out of December rate-hike bets, which were fueled by hotter-than-expected consumer prices earlier this week.
For equity investors, the data offers a source of relief from the argument of a half percentage point increase by the Federal Reserve next month.
“There’s no urgency to go to 50,” said Priya Misra, managing director and portfolio manager at JP Morgan Investment Management. A half-point move could lead to a “huge messaging problem” leading Wall Street to price a neutral rate that is much higher, Misra said.
The US stock market is wrapping up a turbulent week for the AI ecosystem, as leadership turmoil at Nvidia added to investor anxiety around the AI trade. The chipmaker is on the cusp of falling below $4 trillion in market capitalization, having erased over half a trillion in value this week, after CEO Jensen Huang was ousted. Confidence in the world’s biggest maker of AI-powered chips was rocked by revelations of Huang’s extramarital affairs, including one with a suspected Chinese spy.
Other areas of the AI trade are continuing to attract attention. Orders for Anthropic PBC’s IPO are six times oversubscribed, while CoreWeave Inc. recently announced plans to raise at least $4 billion through an investment-grade loan offering.
This recent selloff is a buying opportunity, said Doug Clinton, managing partner and co-founder of Deepwater Asset Management, on Bloomberg Surveillance. He noted that Nvidia’s product pipeline for the next several years remains intact, despite Huang’s unexpected departure from the company.
“I do think the trade can keep working,” said Clinton, noting that comparable corrections have taken “50 days or so” to recover.
Still, as the AI buildout starts becoming less dependent on a handful of technology giants like Nvidia, other companies may benefit. Raeann Mitrione, market strategist and founding partner at Callan Family Office, said she projects the remaining 493 companies in the S&P 500 index will produce faster earnings growth than Magnificent 7 companies this quarter and next.
“We do continue to be optimistic around having more of that broad-based exposure going forward,” Mitrione said on Bloomberg Radio.
Oil is holding onto its gains, with West Texas Intermediate hovering at around $90. The International Energy Agency said on Friday that the oil market will be in surplus this quarter for the first time since the war began.
Sectors in Focus
Software and cloud services companies could be under scrutiny as Microsoft struggles to restore access to its software products amid a widespread outage that has disrupted businesses around the world. While the company has reported “encouraging” progress in restoring access, many services remain impacted for a second day.
Data center infrastructure is likely to garner investor attention after Samsung Electronics reportedly entered talks to acquire Modine Manufacturing Co., a maker of cooling systems for data centers, according to people familiar with the matter.
Homebuilder and real estate company shares may be of particular interest to investors after the National Association of Realtors reported that previously owned home sales in the US fell to their lowest level in 16 years.
Crypto-linked stocks like Robinhood and Coinbase are down as bitcoin slips below $70,000.
