Contracts for the S&P 500 rose 0.5% and those for the Nasdaq 100 rose 1% after the underlying indices fell on Thursday. Shares of Apple rose in late trading after the company beat revenue expectations and issued a bullish holiday forecast. Amazon rose 13% in extended trading after reporting its fastest cloud unit growth in nearly three years. Asian shares rose at the open with a 1% gain in the Nikkei index.
Aftermarket gains at Apple and Amazon offered investors a brief reprieve from a tough session for mega-cap techs, as doubts mounted over whether the massive AI spending will deliver returns. Meta Platforms Inc.’s 11% decline after $30 billion in bond sales weighed on U.S. benchmarks, halting a rally that has added $17 trillion in market value since April.
“None of this means that the AI bubble will burst and that we are on the cusp of a major stock market reversal,” says Matt Maley of Miller Tabak. “However, it does increase the chance that we will see a decline in the short term.”
Elsewhere, government bond yields held steady after rising across the curve. A gauge of the dollar fell after two straight days of progress.
Gold held on to gains to trade above the $4,000 per ounce level again. The yen rose after inflation accelerated in Tokyo. The moves came after a sell-off in several mega-caps dragged U.S. stocks lower on Thursday. Microsoft Corp. fell with disappointing results, while Nvidia Corp. fell when President Donald Trump said he had not spoken to Xi Jinping about approving sales of Blackwell chips to China. The biggest tech companies are betting on an AI future powered by massive data centers filled with whirring servers. As the staggering costs of this push come into clearer focus, Wall Street’s nerves are being tested.
“The only conclusion investors can draw from big tech wins is evidence of which company can stay in the AI race the longest,” says David Trainer of New Constructs. “None of these companies can sustain this massive spending on AI forever, and so those who find a way to benefit first and most from AI will be the winners.”
The selling of U.S. Treasuries reflected Fed Chairman Jerome Powell’s warning that investors should temper expectations for a rate cut in December as U.S. policymakers grapple with the prospects for employment and inflation.
Fed officials voted 10-2 on Wednesday to cut the target range for the federal funds rate by a quarter of a percentage point. It was the second direct rate cut, but for the first time in six years there were disagreements in both directions, with one official advocating a larger cut and the other favoring keeping rates on hold.
The decision was aggressive “because moderates are pushing back,” said Andrew Brenner of NatAlliance Securities. If the Fed fails to cut again in December, investors should “expect fewer cuts next year” as “the bar for employment is raised,” he said.
On the trade front, Treasury Secretary Scott Bessent said he sees the US back at the negotiating table with China in a year. That came after Trump and Xi agreed at a historic summit Thursday to extend a truce, roll back export controls and reduce other trade barriers.
“The long-awaited US-China trade deal showed that both sides are willing to move on from recent escalations, but unwilling to retreat from longer-term competition,” said Paul Christopher of the Wells Fargo Investment Institute.
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