By Jamie McGeever
ORLANDO, Florida, Feb 4 (Reuters) - U.S. stocks mostly fell on Wednesday, slammed by worries that the artificial intelligence revolution could pose an existential threat to businesses across many sectors, while oil rose sharply on reports that planned U.S.-Iran talks may collapse.
More on that below. In my column today I look at the recent wild ride in gold, which has seen the biggest one-day price drop since 1983, biggest rise since 2008, and highest volatility on record. This isn't what buyers of the world's safest asset signed up for, is it?
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
As software stocks slump, investors debate AI's existential threat
Dip-buyers go missing as software selloff slams stocks
Investors ramp up bets on steeper yield curve under Warsh-led Fed
Warning from 'Down Under' may unsettle the Fed: Mike Dolan
EXCLUSIVE-BOJ won't come to the rescue of a Takaichi-driven bond rout
Today's Key Market Moves
STOCKS: S&P 500 -0.5%, Nasdaq -1.5%, Dow +0.5%. UK FTSE 100 and Euro Stoxx close at record highs.
SECTORS/SHARES: S&P 500 tech -2%, energy +2%. Eli Lilly +10%, Super Micro Computer +14%, Alphabet slides 6% after Q4 results but recovers, AMD -17%, Palantir -11%.
FX: Dollar rises, gains most vs SEK, GBP in G10 space; Chinese yuan strongest fix and spot since May 2023.
BONDS: 2-year Treasury yield -1bp, 30-year yield +1bp; curve steepening grinds on.
COMMODITIES/METALS: Oil +3% on U.S.-Iran tensions, silver +3%, gold little changed, copper -3%.
Today's Talking Points
* AI clouds darken
AI optimism is turning to disruption fear. U.S. and world markets are sliding on growing concern that artificial intelligence will have a significantly detrimental impact on a range of software-intensive businesses, from finance to law and coding.
The idea that AI's rising tide will lift all boats is evaporating. Investors will have to pick winners and eschew losers, and determine where AI will enhance and where it will disrupt. As this is a brave new world, it's really a guessing game. The only certainty? More volatility.
* Global growth tracking 3%
It's not just the U.S. - the latest PMI figures from around the world show business activity has got off to a solid start this year. Manufacturing, in particular, is accelerating, and strong new orders suggest this momentum can be sustained.
There are pockets of concern, namely sluggish employment and high prices, and Europe is underperforming. But overall, output is holding up well and is consistent with global GDP growth of 3.0%, according to JPMorgan economists. That's decent.
* Fed dove clips own wings
Fed Chair Jerome Powell reiterated last week that no one on the rate-setting FOMC has a rate hike as their next move "base case". But the hard growth and activity data, financial conditions, and above-target inflation all suggest further easing shouldn't really be anyone's base case either.
To be sure, markets aren't contemplating a hike at all, and rates futures pricing still implies two 25 bps cuts this year. But if arch-dove Governor Stephen Miran is softening his stance a bit, calling for 100 bps of cuts this year rather than 150 bps a month ago, how close might the FOMC consensus be to flipping?
What could move markets tomorrow?
Australia trade (December)
Taiwan inflation (January)
Indonesia GDP (Q4)
European Central Bank interest rate decision
Euro zone retail sales (December)
Bank of England interest rate decision
Mexico interest rate decision
Bank of Canada Governor Tiff Macklem speaks
U.S. weekly jobless claims
U.S. "JOLTS" job openings (December)
U.S. Challenger layoffs (January)
Global earnings including Amazon, Shell, Sony, KKR
U.S. Federal Reserve officials scheduled to speak include Atlanta Fed President Raphael Bostic
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Software companies have missed out on the wider AI-driven rally https://reut.rs/4qgq1KE
(By Jamie McGeever; Editing by Nia Williams)
((jamie.mcgeever@thomsonreuters.com; Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net/))