Tech sell-off hands Wall Street its worst day since July as oil climbs

Wall Street experienced its most significant decline since July, with the S&P 500 dropping by 1.2 percent and the Nasdaq composite plunging by 2.6 percent. The downturn in technology stocks was so pronounced that it overshadowed positive performance in other sectors of the U.S. market, where many stocks actually gained ground. The Dow Jones Industrial Average managed a slight increase, adding 11 points, or less than 0.1 percent.

Despite strong quarterly results, stocks related to artificial intelligence (AI) struggled. Investors expressed concerns that the surge in AI-related stocks might be jeopardized by rising borrowing costs, which are making it more expensive to invest in data centers and acquire AI chips. Additionally, there are apprehensions that stock prices in this sector may have risen too quickly after a prolonged period of enthusiasm, even as companies continue to report growth.

Meta Platforms saw its shares decline by 7 percent, despite reporting quarterly revenue that exceeded analysts' expectations; however, its profits fell short. The parent company of Facebook and Instagram announced plans to create a new class of stock aimed at raising capital for AI investments and other expenses. Tesla's stock also dropped by 3.1 percent after the company reported a stronger-than-expected profit for the summer, although its revenue did not meet forecasts.

The broader sell-off was highlighted by a 4.4 percent decrease in Nvidia's stock. As the largest company on Wall Street by market capitalization, Nvidia's stock movements significantly impacted the S&P 500, making it a major factor in the index's decline.

The decline in tech stocks began in Asia, where key indexes are heavily populated with technology companies. The South Korean Kospi fell by 3.5 percent, Hong Kong's Hang Seng dropped by 3 percent, and Japan's Nikkei 225 sank by 2.7 percent.

Adding to the global market pressures was a significant rise in oil prices. The price of Brent crude oil surged by 4 percent to reach $113.17 per barrel, marking its highest level in five months. This increase followed a rise from below $97 at the beginning of the month, driven by uncertainties surrounding the ongoing conflict with Iran and its potential impact on the global energy sector.

In Europe, the CAC 40 index in France experienced one of the continent's largest losses, declining by 1.4 percent. This drop was influenced by a rise in yields on French government bonds, which have been climbing due to concerns over the government's substantial debt and budgetary constraints. Protests in France have increased pressure on the government to boost spending, which could exacerbate its debt situation.

Concerns regarding high government debt levels are affecting developed economies worldwide, including the United States. These worries, coupled with persistent inflation and signs of a resilient U.S. economy, have pushed bond yields in the U.S. to their highest levels in decades.

However, on Thursday, U.S. bond yields experienced a notable decline as investors sought safety in government bonds amidst the turmoil in AI stocks. The yield on the 10-year Treasury fell to 4.97 percent from 5.13 percent late on Wednesday and from more than 5.30 percent earlier in the month, representing a significant shift in the bond market.

This drop in yields occurred even as a new report indicated that the U.S. economy might be performing better than expected, with fewer workers applying for unemployment benefits last week, suggesting that layoffs remain low across the country.

While the overall economy appears to be supporting corporate profits, contributing to a record high in the U.S. stock market earlier this month, the substantial declines in influential tech stocks overshadowed the positive performance of many individual stocks. Overall, the S&P 500 fell by 93.74 points to close at 7,663.43. The Dow Jones Industrial Average rose by 11.89 points to finish at 52,867.98, while the Nasdaq composite dropped by 694.00 points to close at 26,008.86.