US close: Stocks erase losses after early sell-off as bond yields fall

(Sharecast News) - US stocks erased early losses to finish in positive territory on Thursday after a sharp drop in Treasury yields, with the Dow jumping more than 1% despite hotter-than-expected inflation figures and ongoing concerns about AI-related spending.

The Dow rose 1.1%, while the S&P 500 gained 0.3% and the Nasdaq Composite edged up 0.1%.

The tech-heavy Nasdaq fell as much as 1.4% in morning trade as worries mounted that major tech groups were overspending on AI infrastructure, adding fresh pressure to a sector already under scrutiny.

"Nervousness about the speed with which vast sums of cash are being spent on the race for AI domination has been growing. As producer prices surge and bets are adjusted about the Fed's next step, attention has become laser-focused on where that money is coming from," said AJ Bell's head of financial analysis Danni Hewson.

"With so much debt supporting the mega investment in data centre build-out, cloud infrastructure and chips, the potential for further rate hikes has resulted in a sell-off over the last couple of days."

However, losses were trimmed by the close of play as many investors went bargain-hunting after the recent sell-off, while others moved into healthcare, consumer and financial stocks.

Also helping the bounce was the biggest daily drop in 10-year US Treasury yields in over a year, with the rate falling 10.2 basis points to 5.086%.

Neocloud firm CoreWeave, which had tumbled in recent days amid concerns that the company was borrowing too much to fund its AI build-out, managed to claw back some losses to finish 6% higher.

Heavyweight chip stocks Nvidia and AMD pared earlier losses but still finished in the red. Even TSMC settled lower despite beating expectations with another blowout quarter, delivering a sixth straight record profit as heavy AIrelated spending continued to drive demand. Net income surged 69% yearonyear to NTD $763.1bn (£23.6bn) and revenues jumped 51% to NTD $1.5trn.

Elsewhere, BNY Mellon also topped forecasts, posting Q3 earnings per share of $2.37, some 11cents ahead of consensus, with revenues rising to $5.68bn against expectations of $5.55bn, adding to the week's run of strongerthanexpected bank earnings. The stock finished with solid gains.

Inflation was still on investors' minds, a day after the latest CPI reading showed price growth accelerating from 3.4% to 3.7% in September. Thursday's data from the Bureau of Labor Statistics revealed that US producer prices also jumped in September, posting their strongest monthly rise in more than four years as energy costs surged.

The producer price index for final demand rose 1.3% monthonmonth, following increases of 0.5% in August and 0.2% in July - marking the biggest monthly gain since March 2022. On an unadjusted basis, final demand prices were 6.3% higher than a year earlier, the fastest annual pace since December 2022.

In other macro news, US jobless claims rose by 1,000 to 199,000 in the week ended 10 October, but remained close to multidecade lows, underscoring the continued resilience of the labour market. According to the Labor Department, continuing claims were broadly steady, with the number of Americans receiving unemployment benefits falling by 4,000 to 1.71m in the week ended 3 October.

Meanwhile, US retail sales rose 0.8% monthonmonth in September, according to the Census Bureau, comfortably beating expectations and building on August's upwardly revised 1.3% gain. The headline increase was driven largely by a 6.4% jump in sales at gasoline stations as higher fuel prices fed through. Overall retail sales, which are not adjusted for inflation, were up just 0.2% when excluding gas