Dow Jumps More Than 500 Points as AI Debt Jitters Keep the Nasdaq Under Water
U.S. stocks split sharply on Thursday, Oct. 15. The Nasdaq Composite opened down 1.24% at 26,363.01, near a one-month low, while the S&P 500 slipped 0.43% to 7,685.59 and the Dow Jones Industrial Average gained 266.74 points, or 0.52%, to 51,888.22, according to Reuters. By 12:44 p.m. ET the Dow was up 457.99 points, or 0.89%, at 52,078.61; the S&P 500 had turned positive, adding 3.74 points, or 0.05%, to 7,722.68; and the Nasdaq was down 126.38 points, or 0.47%, at 26,566.48. The split followed the worst day for the S&P 500 and Nasdaq since July on Wednesday, when the S&P 500 fell 1.1% to 7,718.94, the Nasdaq lost 1.9% to close at 26,692.87 and the Dow slipped 48.62 points, or 0.1%, to 51,621.48.
The Bureau of Labor Statistics reported that September consumer prices rose 0.6% on the month and 3.7% year over year, above the 3.6% economists expected, with core CPI up 0.3% on the month and 2.6% over the year versus a 2.5% forecast. Thursday brought a hotter wholesale reading: the producer price index jumped 1.3% in September, against a 0.5% estimate, and 6.3% over 12 months, versus expectations of 5.3%, per BLS data. That was the fastest monthly gain since March 2022 and the largest annual increase since December 2022. Gasoline prices alone rose 20.3% on the month.
Bonds rallied as equities wobbled. CNBC reported the 10-year Treasury yield fell 9 basis points to 5.099%, the 30-year dropped more than 8 basis points to 5.439% and the 2-year shed 6 basis points to 4.74%; at one point the 10-year traded near 5.05%, a three-week low. "That is emblematic of a defensive rotation. It's because of the worry that maybe some sort of a debt crisis is emerging," said Sam Stovall, chief investment strategist at CFRA Research.
Healthcare rose 2.6% and consumer staples gained 1%, with Eli Lilly up 5.2%, UnitedHealth up 4% and Walmart up 2.3% after a Deutsche Bank upgrade, according to Reuters. The S&P 500 information technology sector fell as much as 2% intraday, the benchmark's biggest drag.
The Nvidia-backed AI cloud provider fell 15% on Wednesday to $65.78 and another 8.5% on Thursday. Its unsecured bonds maturing in 2032 traded near 15% before closing at a record 14.5%, and the cost of insuring its debt against default over five years jumped as much as 74.5 basis points to a record 1,194.5 basis points, according to ICE Data Services — pricing that implies a more than 60% probability of default within five years. CoreWeave carried roughly $52 billion in debt and lease obligations as of June, and in August it raised its annual capital spending forecast by $4 billion to as much as $39 billion. Analysts expect nearly $13 billion of revenue this year and a $2.13 billion loss. Nvidia CEO Jensen Huang said CoreWeave needs no backstop; the credit market is pricing something else.
The International Monetary Fund has identified the roughly $1.4 trillion AI financing loop — in which hyperscalers fund AI companies while booking revenue from their compute contracts — as the top trigger for a global market shock. Gartner said about 80% of neoclouds could shut down by 2030 and that more than $3.5 trillion of AI infrastructure spending could face impairment. "Enterprise and consumer AI revenue will be insufficient to support profitable returns on all planned AI capital expenditures," Gartner analyst Will Sommer wrote.
The Fed raised its target range by a quarter point to 3.75%–4.00% on Sept. 16 in a 12–0 vote, saying inflation "remains elevated"; its next decision lands Oct. 28. CME FedWatch put the odds of another hike in October above 49% after the CPI report, up from 22.1% beforehand, while Kalshi and Polymarket priced roughly 37% and 35.5%. Franklin Templeton expects no hike this month, citing recent dovish remarks from Fed officials.
The Nasdaq has fallen more than 4% from the record high it touched last week, and Nvidia slid about 3% on Thursday, leaving it roughly 10% below this month's peak. The Russell 2000 is down 11% from its peak, entering correction territory. On the Nasdaq, 51 members hit new 52-week highs while 351 hit new lows. Earnings may decide what comes next: LSEG expects S&P 500 third-quarter profits to grow 30.6%, bank results have been mixed with JPMorgan missing and Goldman Sachs and UnitedHealth beating, and Brent crude remains above $100 a barrel. How the AI trade digests this week will show whether Thursday was a repricing or a pause.