US equities fell sharply after META's earnings release the previous week, while resource and healthcare stocks were bought. Concerns about downside risks to AI capital spending, long-term interest-rate trends, and the outlook surrounding the US presidential and midterm elections have shaken the market.
Last week, US equities were weighed down by declines in AI-related stocks, with the S&P 500 and Nasdaq posting modest losses. The Dow edged higher, while gains in resource stocks offset the broader market's decline. CoreWeave (CRWV), an AI-related stock, fell 11.6% for a second straight decline amid debt concerns, intensifying selling pressure across AI stocks.
On the same day, Meta Platforms (META) announced its results for July-September 2026. The announcement of increased AI investment and a 1-for-2 stock split raised concerns about investment without corresponding profitability, sending the share price down 9.4% for the week. Lam Research (LRCX) also fell 12.8% after lowering its EPS outlook.
Outside AI-related stocks, software stocks Cybersecurity-related companies CrowdStrike (CRWD) and ServiceNow (NOW) performed well. Resource stocks rose amid heightened tensions in the Middle East and higher oil prices, with Dow component Chevron (CVX) also posting a notable gain. The small-cap-focused Russell 2000 rebounded 2.0% as long-term interest rates declined.
Next week, the focus will be on earnings, including Microsoft (MSFT) and Google's Google Cloud, as well as market developments after the Federal Reserve's FOMC meeting. The market's course could change depending on the midterm election results, and attention will be on how the profitability of AI cloud businesses compares with market expectations.