Dow Sees Best Day In Over A Month As Investors Rotate Out Of AI Trade On Overspending Concerns — CRWV, META, SPCX, PEP In Focus

• The S&P 500 ended Thursday 0.3% higher, the Nasdaq 100 fell 0.1%, and the Dow Jones Industrial Average added 1.1%.
• The September reading on producer prices rose 1.3% on the month and 6.3% year over year.
• Jensen Huang defended the financial health of CoreWeave.

The Dow Jones index added about 1% on Thursday as investors rotated out of chip stocks to the safety of more defensive sectors after producer prices came in hot, stoking rate hike worries.

The S&P 500 ended Thursday 0.3% higher, the Nasdaq 100 fell 0.1%, and the Dow Jones Industrial Average added 1.1%. The Russell 2000, which tracks small-cap stocks, ended 1.4% higher.

S&P 500 futures were flattish, while Nasdaq-100 futures were off 0.1%. Futures linked to the Dow Jones Industrial Average gained 31 points, or about 0.1% at the time of writing. 

The SPDR S&P 500 ETF (SPY) rose 0.3%, the SPDR Dow Jones Industrial Average ETF (DIA) added 1.1%, and the Nasdaq-100 tracking Invesco QQQ Trust (QQQ) eased 0.4%. 

Meanwhile, the VanEck Semiconductor ETF (SMH) and the iShares Semiconductor ETF fell about 1.5% amid weakness in Nvidia (NVDA), Broadcom (AVGO) and Advanced Micro Devices (AMD), with gains in Micron Tech (MU) capping losses. The broader Vanguard Information Technology ETF (VGT) dropped 0.5%.

Retail sentiment on Stocktwits for SPY turned ‘bearish’ while it was ‘neutral’ on the QQQ and DIA, with ‘high’ message volumes.

US Market Drivers

The September reading on producer prices showed prices rose 1.3% on the month and 6.3% year over year, marking its sharpest monthly and annual acceleration since 2022. This, along with higher-than-expected consumer price data released Wednesday, has fanned fears that the Federal Reserve would need to pull back its rate hike plans, which are currently factored in for December. 

TradeStation global head of market strategy David Russell told CNBC that the latest PPI release, combined with Wednesday’s CPI figure, validates persistent inflationary pressures driven by elevated energy costs, potentially compelling central bank intervention regardless of the political environment.

The Nasdaq index, along with ETFs tracking chipmakers and the larger AI trade, has come under pressure, with CoreWeave’s debt burden acting as the catalyst for the fall. That, along with looming investor concerns that bloated capital expenditures might not translate into justifiable earnings, has weighed on the index. 

“Two questions matter. Is demand for AI real? Yes,” Manish Singh at Crossbridge Capital told Bloomberg. “Are we going back to working and using software as we did before AI? No. The structural opportunity is real, but that does not mean every company building the infrastructure will generate attractive returns for investors.” 

Key Trending Stocks

 Nvidia Corp.(NVDA) Chief Executive Officer Jensen Huang on Thursday dismissed concerns regarding the financial stability of CoreWeave Inc.(CRWV), confirming that the chipmaker has no plans to intervene with a rescue package for the troubled artificial intelligence data center operator. 

Meta Platforms (META) on Thursday announced the release of Muse Spark Open, positioning it as the most capable U.S. open-weight artificial intelligence model to date.  

Shares of PepsiCo (PEP) slipped 1% on Thursday after KFC U.S. announced a new exclusive beverage partnership with The Coca-Cola Company, effectively ending its long relationship with PepsiCo in the country. 

European Union antitrust officials are laying the groundwork to swiftly approve a coalition of European firms termed Project Bromo, intended to counter SpaceX’s dominance in satellite launch, Bloomberg reported.  

Shares of Moderna (MRNA) rose sharply on Thursday, hitting a new 52-week high, after Goldman Sachs raised its price target on the stock, pointing to anticipation for the company’s full trial data on its cancer vaccine. 

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