Tech Selloff Drags Stocks Lower, Bonds Rise Amid Weak Services Data

Overview

A decline in major tech companies weighed on global stock markets, while bonds rallied after disappointing US services data.

Market Update

* S&P 500: -0.3%
* Nasdaq 100: -0.5%
* Dow Jones Industrial Average: Little changed
* 10-year Treasury yield: -8 basis points to 4.43%

Technology Stocks Decline

* Alphabet Inc. shares dropped sharply following underwhelming results.
* Apple Inc. lost nearly 2% amid concerns over a potential probe into its App Store fees.
* Advanced Micro Devices Inc. tumbled 10% on a disappointing outlook.
* Nvidia Corp. gained 3%.

"Magnificent Seven" Concerns

* The "Magnificent Seven" tech giants (collectively representing a third of the S&P 500's weight) have driven recent earnings and equity returns.
* However, profit growth is slowing as spending increases, raising concerns over lofty valuations.
* Ed Yardeni of Yardeni Research notes skepticism about the returns justifying massive AI outlays.

Capital Expenditure Scrutiny

* Tech giants have significantly increased capital expenditures on infrastructure and equipment.
* Chinese AI startup DeepSeek's cost-efficient AI model raises questions about capex efficiency.
* BlackRock Investment Institute sees a "broadening set of AI beneficiaries" but remains overweight US stocks.

Chinese Antitrust Investigation

* China's antitrust watchdog is considering an investigation into Apple Inc.'s App Store policies and fees.
* This move is part of Beijing's broader push against the US-China trade war.

Corporate Highlights

* Chipotle Mexican Grill Inc. sales missed expectations due to industry slowdown.
* Walt Disney Co. reported strong results driven by film releases and streaming services.
* Harley-Davidson Inc. revenue fell short of estimates.
* Match Group Inc. appoints Spencer Rascoff as CEO.
* Uber Technologies Inc. issues a disappointing outlook due to currency headwinds and severe weather.

Upcoming Economic Events

* Thursday: Eurozone retail sales, UK rate decision, US initial jobless claims
* Friday: US nonfarm payrolls, unemployment, University of Michigan consumer sentiment