U.S. Treasury Secretary Scott Bessent downplayed concerns regarding AI-related debt as major stock indices marked a third consecutive winning day. Meanwhile, markets braced for upcoming economic data releases, including initial jobless claims and consumer spending figures, while global equities faced a separate risk-off retreat driven by escalating conflict in the Middle East and surging crude oil prices.
Wall Street continued its upward momentum as major stock averages notched their third consecutive winning day. Attention now turns to a busy slate of economic indicators on the horizon, with the Dow Jones consensus estimating initial jobless claims to land at 200,000. Economists are also tracking September personal income, projected to increase by 0.3%, alongside a forecasted 0.6% rise in consumer spending.
Inflation metrics remain at the center of investor focus. The Personal Consumption Expenditures price index is anticipated to show a 0.5% monthly gain, pushing the year-over-year rate to 3.7%.
Treasury Secretary Scott Bessent and Jeffrey Gundlach on Bond Yields and AI Debt
Bond market heavyweights offered divergent perspectives on artificial intelligence financing and future monetary policy during high-profile media appearances on CNBC’s morning show “Squawk Box,” hosted by Becky Quick, Joe Kernen, and Andrew Ross Sorkin. Treasury Secretary Scott Bessent dismissed anxieties surrounding debt tied to the tech boom.
We’re seeing the neoclouds are a small share of the financial ecosystem, and we’re still seeing the financing getting done. We’re still seeing the deals get done and we’re also seeing companies like Meta decide to finance through equity.
Scott Bessent, Treasury Secretary, via CNBC
Not everyone shared that optimism. DoubleLine’s Jeffrey Gundlach raised alarms about how financial markets value emerging technology firms, drawing parallels to past credit cycles.
We’re running into a problem that the market isn’t accepting the ratings that are being put on some of these AI-adjacent businesses and this reminds me a little bit of how the market started to behave regarding, say, triple-B subprime.
Jeffrey Gundlach, DoubleLine, via CNBC
Beyond the tech sector, Gundlach also stirred debate regarding the central bank’s next move by asserting his base case is probably a hike in December. As trading closed, the 10-year Treasury yield settled at 5%, while the two-year yield stood at 4.691%. Short-term yields ranged downward, with the six-month at 4.334% and the one-month at 3.98%. Yield-seeking investors continued evaluating high-yield corporate bond ETFs, with the iShares iBoxx High Yield Corporate Bond ETF posting a dividend yield of 6.06%.
Corporate Earnings and Neoclouds Pressure Tech Giants
Corporate earnings reports triggered sharp after-hours movements across major equities. Microsoft cheered investors by beating top and bottom-line estimates in its fiscal first quarter, sending shares up 3% in extended trading. Yet, the ripple effects of lower-than-anticipated capital expenditures caught up with AI-linked neoclouds infrastructure providers. CoreWeave dropped about 4%, Nebius fell 5%, and Iren declined 3% in after-hours action as markets reacted to reduced spending forecasts.
Alphabet shares faced heavy downward pressure, tumbling nearly 10% in extended trading after missing third-quarter expectations. Meanwhile, Chipotle CEO Scott Boatwright addressed analysts and investors following an earnings miss that contrasted with rising same-store sales.
We are still in the early days of this strategy.
Scott Boatwright, CEO, via CNBC
Boatwright expressed confidence in the company’s strategy despite current challenges, helping push Chipotle shares up 7% after hours despite the stock sitting 30% below its January high.
>
