US open: Stocks fall again as hopes of December rate cut fade

(Sharecast News) - US stock markets fell again in early trade on Friday following heavy losses in the previous session, as hopes of a December rate cut by the Federal Reserve faded and amid ongoing concerns about an AI bubble.

At 1520 GMT, the Dow Jones Industrial Average was down 1%, while the S&P 500 and the Nasdaq were both 0.5% lower.

On Thursday, US stock markets suffered their worst session in more than a month, with the tech sector hit particularly hard amid worries about a potential AI bubble.

David Morrison at Trade Nation said: "Investor concerns over stretched valuations, returns on investment as well as the circulatory nature of funding in the AGI space, all contributed to the flip in sentiment.

"Market heavyweights Nvidia and Palantir came under significant selling pressure once again, while the only 'Magnificent Seven' constituent to avoid a flogging was Apple. Semiconductors were lower across the board and were feeling the heat in early trade this morning. Another notable casualty of this risk-off move is Oracle.

"The stock surged to an all-time high in early September after the company announced a series of multi-billion-dollar cloud and AI infrastructure contracts with clients such as OpenAI, xAI, Meta and Nvidia. But it then came under near-relentless selling pressure and has lost 37% of its value since then. As an aside, Nvidia releases its quarterly results after the close next Wednesday."

As the US economic data release calendar takes time to get back on track after the recent shutdown, the October retail sales figures and PPI, and September business inventories data that were due on Friday were all delayed.

Emma Wall, chief investment strategist at Hargreaves Lansdown, said: "The end of the US shutdown euphoria has proved short-lived. While the promise of resolution was welcome for equity and bond markets, the news that we may never get October's jobs and inflation data has poured doubt on the previously baked-in Fed rate cut in December.

"Without key data, policy decision makers will find it harder to definitively act next month - and yesterday Federal Reserve Bank of Minneapolis President Neel Kashkari implied he was still on the fence about a cut."

Further dampening sentiment was a barrage of disappointing economic data releases in China, where annual growth in industrial production and retail sales dropped to a 14-month low, and fixed-asset investment growth sank by its most in over five years.

In equity markets, Walmart dropped as it announced that chief executive Doug McMillon will retire at the end of January after more than decade in the job. John Furner will succeed McMillion, who remain on the board of directors until the next annual shareholders' meeting and help ensure a smooth transition.

Applied Materials was also in the red after fourth-quarter results.

On the upside, Cidara Therapeutics rocketed after agreeing to be bought by Merck in a $9.2bn deal.

Warner Bros Discovery gained after the Wall Street Journal reported that Paramount, Comcast and Netflix were preparing a bid for the company.