AI Earnings Revival Lifts Nasdaq 1%, But Bond and Oil Markets Sound Caution
TREE NEWS reports: Strong quarterly results from AI-linked companies reignited risk appetite on Wednesday, sending the three major U.S. stock indexes higher. The tech-heavy Nasdaq Composite rose 1.05% to 26,702.86, its second gain of more than 1% this week. The S&P 500 added 0.58% to 7,757.17, and the Dow Jones Industrial Average climbed 360.21 points, or 0.69%, to 52,856.09. The rally was powered by SpaceX, which reported third-quarter profit far above expectations and AI business revenue growth of 830% year-over-year, and Super Micro Computer, which sharply raised its revenue guidance for the first quarter of fiscal 2027. Their results offered fresh evidence that massive AI capital expenditures can translate into actual revenue and profits, easing—though not eliminating—investor concerns about an AI valuation bubble.
Market Implications
The gains were concentrated in technology and AI infrastructure names. SpaceX (SPCX) surged as much as 12.4% intraday before closing up 7.8%, while Super Micro jumped 9.6%, lifting Dell 5.3%, Hewlett Packard Enterprise 3.7%, and memory-chip stocks such as Western Digital (3.9%) and SK Hynix (2.5%). Meta rose 0.5% ahead of its after-hours report, which showed revenue up 26% to $64.6 billion and prompted a 7% after-hours pop before paring gains. Tesla rose 3.4% in regular trading but fell more than 3% after hours during its earnings call. Netflix dropped 5.3% after weak guidance.
Yet the broader macro backdrop remains fragile. The French 10-year government bond yield broke above 5.0% for the first time since 2002, and the spread over German Bunds widened to about 159 basis points, the widest in 15 years, signaling deep investor concern over France’s fiscal trajectory and political uncertainty. U.S. Treasury yields also rebounded, with the 10-year note yielding 5.1253%, up nearly 2 basis points. Oil prices whipsawed: WTI crude initially rose above $100 a barrel and Brent above $111 before reversing; WTI settled down 0.68% at $97.15, while Brent edged up 0.03% to $108.82. Reports of a drone attack on a Saudi Aramco oil field briefly pushed crude higher again after the close.
In currencies, the dollar index hovered near a two-week low around 101.70. Offshore yuan strengthened past 6.68 for a fifth straight session, hitting a fresh four-year high. The euro remained pressured by French fiscal risk, while sterling and the Australian dollar found support from hawkish central bank signals and elevated U.K. inflation. Bitcoin climbed above $84,800, its highest since October 7. Gold snapped a two-day decline, with COMEX October futures up 0.2% at $4,130.50 an ounce, as lower real yields reduced the opportunity cost of holding the metal.
Key Takeaways for Investors
- Earnings are back in the driver’s seat, but valuation risk persists. The AI trade is being revived by tangible profit evidence, yet Citadel’s Ken Griffin warned the market is “almost certainly in an AI bubble,” as many companies have yet to clarify the ultimate scale of AI spending and its economic impact.
- Bond markets are flashing warning signs. France’s fiscal deterioration and rising global yields could tighten financial conditions and pressure equity multiples, particularly for long-duration growth stocks.
- Energy remains a wild card. High oil prices threaten to feed inflation and complicate central bank policy, while geopolitical supply risks keep crude volatile.
- AI’s cost side matters. BlackRock CEO Larry Fink cautioned that delays in data-center construction could raise computing costs and even stoke inflation, linking AI investment to future growth and rate paths.
- Diversification is prudent. With equities rallying, bonds selling off, and commodities swinging on headlines, investors should monitor cross-asset correlations and maintain hedges against macro shocks.
