Market Update
The S&P 500 dropped 29.98 points to 6,878.88. The Dow Jones Industrial Average declined by $521.28 to $48,977.92, while the Nasdaq Composite Index fell 210.17 points, settling at 22,668.21.
NEW YORK — U.S. stock markets stumbled on Friday as concerns about companies at risk from artificial intelligence impacted investor sentiment. Meanwhile, oil prices climbed amidst escalating tensions between the U.S. and Iran, and a discouraging inflation report added further pressure on the markets.
The S&P 500 fell by 0.4%, marking only its second weaker month in the last decade. The Dow experienced a decline of 521 points (1.1%), and the Nasdaq witnessed a drop of 0.9%.
These losses were driven by a trend where investors targeted software firms and other businesses viewed as vulnerable to AI advancements.
Block, the company known for Cash App and Square, provided a glimpse into AI’s potential after Chairman Jack Dorsey announced a workforce reduction of nearly 50%. This move came despite his optimistic outlook for 2025, highlighting an increase in shareholder returns through buybacks.
Dorsey remarked, “Intelligence tools have changed what it means to start and run a company… We’re doing more with smaller teams.” He expressed concerns that many firms are late in recognizing this shift and predicted that most would likely make similar structural changes soon.
Block is eliminating over 4,000 jobs from its staff of more than 10,000. Interestingly, the company’s stock rose 16.8% following the announcement.
A robust AI tool could potentially disrupt entire companies or significantly reduce their profit margins. This anxiety over AI’s impact has led to sharp declines in stocks perceived as at risk, with the worry spreading across diverse sectors like trucking and legal services.
Salesforce, a platform for managing customer relationships, saw its stock dip by 2.3%. Nonetheless, it had previously risen 4% after reporting a profit that surpassed analyst expectations.
Private equity firms that have invested in or loaned to software companies also faced challenges, given the AI threat. Apollo Global Management’s stock fell 8.6%, the sharpest decline in the S&P 500. Blue Owl Capital, associated with loans to software firms, dropped 6%.
Interestingly, even companies benefitting from AI-related demand are not immune to market pressure. Nvidia’s stock fell 4.2%, marking its most significant loss since last spring despite reporting better-than-expected profits and predicting increased sales for the upcoming quarter.
Other semiconductor companies faced declines as well. Investors are questioning whether these firms can maintain their growth in the face of rising costs. Concerns linger about whether giants like Amazon and Alphabet will recover their substantial investments in AI through improved productivity and profits.
However, Netflix had a standout performance on Wall Street, climbing 13.8% after rejecting an acquisition bid for Warner Bros. Discovery’s studio and streaming properties. This shift seems to position Paramount, owned by Skydance, favorably to acquire its rival in Hollywood.
In related market movements, Paramount Skydance’s stock surged 20.8%, while Warner Bros. Discovery fell by 2.2%.
Overall, the S&P 500 closed down 29.98 points, while the Dow fell $521.28, and the Nasdaq decreased by $210.17.
Oil prices emerged as a significant player in financial markets, with benchmark U.S. crude rising 2.8% to settle at $67.02 a barrel. The fluctuating prices reflect ongoing tensions between the U.S. and Iran concerning Iran’s nuclear ambitions.
The U.S. military’s recent buildup of forces in the Middle East raises concerns about potential disruptions to global oil supplies and price hikes.
Brent crude, the global benchmark, increased by 2.4%, reaching $72.48 per barrel.
Additionally, reports indicated a 2.9% inflation rate at wholesale levels last month, which was notably higher than the 1.6% anticipated by economists. This could compel the U.S. Federal Reserve to reconsider further interest rate cuts. Reducing rates generally supports the economy and boosts investment prices, but it also poses risks for inflation.
In the bond market, yields on 10-year government bonds dipped to 3.96%, dropping briefly after the inflation data but down from 4.02% late Thursday. Typically, when tensions rise, investors tend to gravitate towards safer investments, leading to lower bond yields.
In global markets, European and Asian indexes displayed mixed results. South Korea’s Kospi fell 1% from its recent peak, whereas Hong Kong’s Hang Seng Index saw a rise of 0.9%, marking two of the most considerable price movements globally.
A prior version of this report mistakenly referred to Apollo Global Management as Blue Apollo Global Management.
