The S&P 500 fell 1.9% this week and the Nasdaq dropped 4.5%. The Dow gained 0.7%. That split tells the story: money left AI and chips and moved into staples, health care, energy and Treasuries, even as inflation came in hotter than expected.
Top Stories
1. The AI trade cracks, led by chip equipment. Selling built through the week and accelerated after Wednesday’s CPI. The semiconductor ETF (SMH) fell 12.2%. Beating estimates didn’t protect anyone:
Applied Materials: -21.0%
Lam Research: -19.0%
Micron: -16.6%
TSMC: -11.1%, despite beating ($4.60 vs. $4.45 per ADR)
ASML: -9.8%, despite beating ($14.47 vs. $12.18)
Nvidia: -8.4%
2. CoreWeave’s bonds flash warning signs. Its 9.625% notes due 2032 traded near a 15% yield on Tuesday. That is more than five points above the coupon.
On X: Chamath Palihapitiya’s chart of those yields went viral, with the question of whether AI is building a private credit bubble.
The company’s response: CEO Michael Intrator called the selloff irrational and pointed to a $104 billion backlog.
The fallout: CoreWeave stock fell 25.8% for the week. Reuters reported Thursday that the cost of insuring U.S. tech debt against default hit record levels. Oracle fell 6.2%.
3. Inflation runs hot, twice. Wednesday’s CPI showed 3.7% annual inflation vs. 3.6% expected, with core at 2.6% vs. 2.5%. The S&P fell 1.1% that day, its worst session since July. Thursday’s PPI jumped 1.3% in September, the biggest monthly gain since March 2022. Chicago Fed President Goolsbee called the CPI discouraging. Still, futures priced only about 15% odds of an October hike Friday morning, per CNBC.
4. Big banks beat, and the stocks shrugged. All six big banks fell on their report days.
Beats: Goldman earned $17.01 per share vs. $13.09 expected, on a 72% jump in equities trading. Citi ($2.85 vs. $2.65) and Morgan Stanley ($3.03 vs. $2.93) also beat.
Misses: JPMorgan missed ($5.75 vs. $5.93). Bank of America came in at $1.08 vs. $1.10, a day after a $1.2 billion Treasury fine.
For the week: JPMorgan +2.6%, Wells Fargo +2.3%, Goldman -0.7%, Citi -3.0%, Morgan Stanley -3.8%, Bank of America -4.1%.
5. Oil crosses $100. On Wednesday, Houthi missile and drone strikes hit Saudi Arabia, including Saudi Aramco’s headquarters. Iran escalated attacks in the Strait of Hormuz, and Ukraine resumed strikes on Russian refineries. WTI rose 7.8% to $99.02 and topped $100 on Friday. On Thursday, the IEA announced a release of more than 20 million barrels of diesel. Energy stocks gained 5.0%.
6. Tesla’s flying Roadster steals the spotlight but not the stock chart. On Thursday night, Musk unveiled the long-delayed Roadster at a SpaceX site in Texas. The car jumped and flipped in midair using air thrusters built with SpaceX engineers.
The details: Production is planned for 2028, and reserving one reportedly costs $250,000. The version that flipped, called the Rocket, is invite-only, has one seat and isn’t street legal.
The stock: Tesla rose about 4% before Friday’s open, then closed down 2.1% as the chip selloff took over. It finished the week down 7.2%.
The bigger story: Merger speculation. Odds of a Tesla-SpaceX merger before March jumped to 56% on Kalshi Friday, up from 29% on Wednesday, per CNBC.
Key Themes for Investors
AI’s problem moved from demand to financing. Last week the scare was OpenAI’s revenue. This week it was who pays for the buildout, and the most leveraged names fell hardest. Note the disconnect: CoreWeave raised guidance and its backlog is intact, but its credit market is pricing serious risk. When the stock and the bonds disagree, the bonds are usually worth listening to.
Beats aren’t enough. TSMC, ASML, Goldman and Citi all beat earnings and stock prices still fell. Tesla’s Roadster got a premarket pop that was gone by the close. In crowded trades, the quarter matters less than what comes next. Keep that in mind when Tesla reports Wednesday and big tech reports at the end of the month.
Bonds are working as a hedge again. The 10-year yield fell from 5.24% to 5.09% in a week with the hottest PPI since 2022.
The bullish read: MarketWatch framed it as buyers deciding yields were high enough to lock in.
The bearish read: Popular on Seeking Alpha, it says bonds are starting to price an AI bust and a slowdown.
Either way: Treasuries offset stock losses this week.
Defensives took the lead. Staples (+5.6%), health care (+5.4%) and energy (+5.0%) all gained more than 5%. UnitedHealth rose 7.4% after beating ($4.69 vs. $4.14). Small caps fell 3.1%, and MarketWatch noted the Russell 2000 is down 10% from its record in just two months.
Bottom Line
The market started grading AI companies on their balance sheets, not just their backlogs. Favor businesses that fund growth from cash flow over ones that need cheap credit to keep building.
Market Data (weekly)
S&P 500: -1.92% (7,659.44)
Nasdaq: -4.48% (26,140.03)
Dow: +0.67% (52,002.41)
Russell 2000: -3.05% (2,721.37)
VIX: 19.99 (from 14.84; topped 22 intraday Friday)
10-Year Treasury: 5.09% (from 5.24%)
2-Year Treasury: 4.74% (from 4.80%)
WTI crude: +7.8% ($99.02) | Brent crude: +4.9% ($109.86)
Sector Performance
Consumer Staples: +5.62% (best)
Health Care: +5.35%
Energy: +5.05%
Utilities: +3.03%
Materials: +2.97%
Real Estate: +2.38%
Financials: +2.34%
Consumer Discretionary: +0.09%
Industrials: -0.56%
Communication Services: -0.84%
Technology: -7.99% (worst)
Key Economic Data
CPI (Sept.): 3.7% year over year vs. 3.6% expected, up from 3.4%. Core: 2.6% vs. 2.5%, and +0.3% for the month vs. +0.2%.
PPI (Sept.): +1.3% vs. +0.5% expected. Annual: 6.3%. Core PPI: +0.7% vs. +0.3%.
Retail sales (Sept.): +0.8% vs. +0.3% expected, boosted by gasoline. Excluding gas and autos: +0.2%, in line.
Jobless claims: 199K vs. 200K expected.
Empire State manufacturing: 25.5 vs. 10.3 expected.
Philly Fed manufacturing: 20.9 vs. 28.4 expected.
Industrial production: +0.7% vs. +0.4% expected.
Import prices: +1.1% vs. +0.8% expected.
Existing home sales: 3.99 million vs. 3.95 million expected. 30-year mortgages held at 7.40%.
Beige Book: Price pressures are intensifying, and the job market is stuck in low-hire, low-fire mode.
Federal deficit: Nearly $2 trillion for fiscal 2026, about 6.2% of GDP.
Earnings:
UnitedHealth beat ($4.69 vs. $4.14) and rose 7.4%.
Travelers beat ($9.18 vs. $7.39) and rose 5.8%.
TSMC beat ($4.60 vs. $4.45) but fell 11.1%.
ASML beat ($14.47 vs. $12.18) but fell 9.8%.
What to Watch Next Week
Mon: NAHB homebuilder sentiment (expected 31).
Tue: Housing starts (expected 1.30 million). Netflix (EPS est. $0.82) and GM ($3.69) report.
Wed: Tesla reports (EPS est. $0.45). After the Roadster hype, the focus shifts back to auto margins, spending on robotaxis and Optimus, and any comment on the SpaceX merger talk. Lam Research ($2.18), Texas Instruments ($2.42), IBM ($2.86) and AT&T ($0.60) also report. After a 19% drop, Lam’s outlook will test whether chip equipment demand is actually slowing. 20-year bond auction.
Thu: Jobless claims.
Fri: S&P Global PMIs (composite expected 57.6).
Later: Coca-Cola Oct. 27, FOMC Oct. 27 to 28, ServiceNow Oct. 28, Intel Oct. 29, midterms Nov. 3, Cook hearing Nov. 5.
This week showed how fast the market reprices a business when its funding comes into question. CoreWeave lost a quarter of its value even after raising guidance, because its bondholders started demanding 15%.
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