AI selloff drags Nasdaq 100 down 6.36% in broad market rout

The rotation out of AI that began Wednesday escalated into a sweeping selloff on Thursday. While the Nasdaq 100 was hardest hit, the Russell 2000 declined 4.45% and the Dow industrial average surrendered more than it added a day earlier. Lower Treasury yields gave gold a lift but failed to support tech stocks or bitcoin.

Crude moved in the opposite direction. Wednesday's sharp drop was driven by hopes of a resolution to the Iran conflict; Thursday's session saw the risk to supplies return to the fore after reports of new shipping incidents in the Gulf. The dollar showed a mixed picture, with the Australian dollar suffering the largest loss among the majors while the yen fared best.

The dollar gains against the Aussie but loses ground to the yen

The US dollar advanced against the Australian dollar but fell back against the Japanese yen. Against the AUD, the greenback recorded its largest gain; AUDUSD dropped 1.13% to 0.6925. Versus the yen the dollar was at its weakest, with USDJPY falling 0.49% to 157.64. The move in USDJPY was in line with lower US yields, while the Aussie declined in step with other risk-sensitive assets.

Elsewhere, EURUSD declined 0.09% to 1.1217, GBPUSD slipped 0.17% to 1.3448, and NZDUSD was off 0.50% at 0.5592. USDCAD climbed 0.31% to 1.4020 even as crude rebounded, whereas USDCHF inched down 0.02% to 0.8166.

Treasury yields fall, led by the 2-year

• Two-year yield fell 11.45 basis points to 4.4665%.
• Five-year yield dropped 7.82 basis points to 4.6098%.
• Ten-year yield declined 5.12 basis points to 4.8408%.
• Thirty-year yield eased 2.19 basis points to 5.2581%.

The yield curve steepened as short-dated yields outperformed longer-dated ones in their decline. The magnitude of the move at the short end was notable given that jobless claims came in below forecasts and crude rebounded.

Wall Street ended the session solidly in the red

• Dow industrial average shed 1,833.16 points (−3.44%) to 51,528.16
• S&P 500 dropped 334.77 points (−4.35%) to 7,353.85
• Nasdaq Composite lost 1,421.52 points (−5.52%) to 24,315.00
• Russell 2000 gave back 127.11 points (−4.45%) to 2,729.84
• Nasdaq 100 plunged 1,807.36 points (−6.36%) to 26,629.81

AI suppliers lead the selloff

Concerns over the pace of the AI buildout fed selling across memory, storage, chip-equipment and data-center names. Micron traded roughly 12% lower in the session as investors weighed how quickly supplier orders would follow capital spending on AI. The question extends across the supply chain, from memory for AI accelerators to storage drives.

Every one of the Magnificent Seven stocks was trading lower in a late check of the session. Nvidia and Tesla were the only two names losing more ground than either of the Nasdaq indexes at that point. Apple and Alphabet were the best performers, off 1.27% and 1.53%, respectively.

Europe closes mixed

• Spain's IBEX 35 rose 0.59%
• France's CAC 40 added 0.34%
• Germany's DAX fell 0.43%
• U.K.'s FTSE 100 declined 0.43%
• Italy's FTSE MIB dropped 1.03%

U.S. data hold up as markets look to Washington

Jobless claims came in at 189,000 against an expected 196,000, and third-quarter productivity growth of 3.6% exceeded the 2.8% forecast. Across the Atlantic, the Bank of England lifted its policy rate 25 basis points to 4.00%, pointing to inflation linked to the Middle East conflict and rising energy costs. Sterling still lost ground to the US dollar.

After European markets shut, Adam Button pointed to two questions emerging from the midterm elections: whether the Trump administration would alter its stance on Iran, and whether it would ease tariffs under pressure from Congress. The answers carry weight for oil-supply risk and the inflation outlook.

Crude rebounds as Gulf shipping risks resurface

WTI futures settled at $90.52 a barrel, a gain of $2.40 or 2.72%, and were later quoted at $91.06, up 3.34%. The decline of more than 8% on Wednesday had been driven by optimism over a possible exit from the Iran war. On Thursday, reports of several shipping incidents in the Gulf brought the supply risk back into view for traders. Treasury yields continued to fall even as crude prices recovered.

Gold gains while silver and copper fall

Spot gold increased 0.68% to $4,088.02. The drop in Treasury yields lowered the opportunity cost of owning the metal, and the selloff in equities fitted a pattern of safe-haven demand. Silver was 0.94% lower at $51.76 and copper fell 3.51% to $6.2035. The slide in those two metals was in line with their heavier reliance on industrial activity.

Bitcoin gives back its rebound

Bitcoin traded 5.69% lower at $75,861 late in the session. It had risen with equities on Wednesday and dropped with them on Thursday, behaving much more like a tech-heavy index than a commodity or haven.

What carries into Friday

The key question is whether demand returns for the chip and data-center stocks that drove the market lower. Also on the watch list are whether the two-year yield maintains its drop and whether crude can hold its rally. A continued bid for oil alongside persistent pressure on short-term yields would be a disparity worth tracking.