Markets tumble on Big Tech's AI spending worries and rising yields

Dow sank 419, decliners over advancers 3-1 & NAZ tumbled 452.  The MLP index fell 2+ taking it below 281 & the REIT index fell 2+ to the 427s.  Junk bond funds fluctuated & Treasuries were sold again, taking high yields even higher (more below).  Oil was up almost 1 to the mid 68s & gold tumbled 56 to 2744.

Dow Jones Industrials

An inflation gauge closely watched by Federal Reserve policymakers continued to slow in Sep, as the pace of price growth trended closer to the Fed's target in Sep.  The Commerce Det reported that the personal consumption expenditures (PCE) index rose 0.2% in Sep & increased 2.1% year over year, in line with estimates.  Core PCE, which excludes volatile food & energy prices, rose 0.3% for the month & increased 2.7% from a year ago, also in line with estimates.  The Federal Reserve is focusing on the PCE headline figure as it tries to bring the pace of price increases back to 2%, although policymakers view the core data as a better indicator of inflation.  Headline PCE was down from 2.3% in Aug to 2.1% in Sep, suggesting inflation continued to cool, while the core PCE was little changed from a month ago.  The headline PCE data showed that prices for goods declined by 1.2% in Sep compared with a year ago, while prices for services were up by 3.7%.  Food prices were up 1.2% & energy prices were down 8.1% from a year ago.  Wages & salaries were up 0.5% in Sep from a month ago, the same growth rate as in Aug.  That was slightly higher than the 0.4% growth recorded in Jul & 0.2% in Jun, but notably slower than the 1.1% wage growth seen in Feb.  The personal savings rate as a percentage of disposable income was 4.6% in Sep, down from 4.8% in Aug.  The data comes as the Federal Reserve is preparing to meet next week & discuss its next move on interest rates.  The market's expectations about the Fed cutting rates by 25 basis points are little changed following the PCE release, as traders see a 94% chance of a cut that size.

Inflation gauge closely watched by the Fed falls to lowest level in years

Treasury yields rose as traders parsed the latest economic data in the run-up to tomorrow's all-important jobs report.  The 10-year Treasury yield was nearly 7 basis points higher at 4.331% & the 2-year Treasury yield added 6 basis points to 4.216%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Weekly jobless claims, meanwhile, came in under the forecast.  That can bolster expectations for continued strength in the labor market.  These releases come as investors await data on nonfarm payrolls, the unemployment rate & hourly wages tomorrow.  It's the last jobs day before the presidential election & next Federal Reserve policy meeting, which are both scheduled for next week.

10-year Treasury yield trades above 4.3% before Friday’s jobs report

Uber (UBER) reported 3rd-qtr results that beat expectations for revenue but missed on analysts’ projections for gross bookings.  Revenue grew 20% in its 3rd qtr from $9.3B a year prior.  The company reported $40.97B in gross bookings for the period, which is below the $41.25B expected.  The company reported EPS of $1.20, up from 10¢ in the same qtr last year.  UBER said its net income includes a $1.7B pre-tax benefit from unrealized gains related to the reevaluation of its equity investments.  Adjusted EBITDA was $1.69B, up 55% year over year & slightly above the $1.64B expected.  “We are in the fortunate position of having strong performance in our core business, which allows us to make organic investments in new products and capabilities that will pay off for our platform over the long term,” Uber CEO Dara Khosrowshahi said.  For its 4th qtr, UBER expects gross bookings $42.75 - $44.25B, compared with estimates of $43.68B.  UBER anticipates adjusted EBITDA of $1.78 - $1.88B, compared with the $1.83B expected by analysts.  There were 2.9B trips completed on the platform during the period, up 17% year over year.  The number of monthly active platform consumers reached 161B in its 3rd qtr, up 13% year over year from 142M.  The stock dropped 8.43 (11%).

Uber reports third-quarter results that beat Wall Street’s revenue expectations

Optimism for a Big Tech boost to stocks took a knock as investors digested Meta (META) & Microsoft  (MSFT), a Dow stock, quarterly reports.  While the results beat estimates, both companies flagged that they will step up already high spending on AI infrastructure.  Concerns that would put pressure on profitability sent shares lower.  Bond yields surged with the 10-year Treasury climbing to 4.33%.  The US $ index, which measures the greenback against a basket of currencies also rose.  Overseas, UK bond selling intensified over worries of inflation amid fiscal stimulus & borrowing.  Risky investments (i.e. stocks) are not in vogue.