Listen to the article
Global equity markets experienced significant turbulence on Thursday, with MSCI’s global equities gauge dropping more than 1 percent amid mounting concerns over artificial intelligence spending and weakening U.S. labor market data. The selloff rippled across multiple asset classes, as investors retreated from technology stocks and sought safety in traditional havens while reassessing the sustainability of AI-driven market gains.
Major U.S. indices closed sharply lower, with the Dow Jones Industrial Average falling 592.58 points to 48,908.72, the S&P 500 declining 84.32 points to 6,798.40, and the Nasdaq Composite dropping 363.99 points to 22,540.59. Meanwhile, the pan-European STOXX 600 index finished down 1.05 percent as investors digested mixed earnings reports from the region.
AI Spending Concerns Trigger Global Equities Selloff
The market downturn accelerated after Amazon.com revealed plans to spend $200 billion in 2026, vastly exceeding analyst expectations of $144.67 billion, according to market observers. Following the announcement after Thursday’s market close, Amazon shares tumbled more than 10 percent. This came one day after Google parent Alphabet unveiled a capital expenditure plan reaching up to $185 billion, approximately 55 percent above estimates.
According to Ameriprise Financial’s chief market strategist Anthony Saglimbene, investors are growing increasingly worried about the massive spending increases technology companies are committing to support artificial intelligence infrastructure. Software companies faced particularly intense pressure amid concerns about AI-driven competition reshaping the sector.
Technology Weakness Erodes Broader Market Sentiment
Saglimbene warned that continued pressure on big tech and AI stocks could drag down broader market averages despite recent rotation into cyclical and value stocks. “If big tech and AI lose more momentum, it’s likely that broader averages like the S&P 500 will see more pressure,” he said, noting that investors are adopting more defensive positioning as market momentum wanes.
However, Brian Levitt, chief global market strategist at Invesco, offered a more optimistic perspective. He characterized the current downturn as a temporary pullback following a significant advance, maintaining his bullish stance on risk assets given the economy’s underlying strength.
Weak Labor Data Boosts Treasury Demand
U.S. Treasury yields fell sharply after disappointing employment data showed new unemployment benefit applications rising more than expected. Additionally, the Labor Department’s Job Openings and Labor Turnover Survey revealed job openings dropped to their lowest level in more than five years during December, with prior month data revised lower.
The benchmark 10-year Treasury yield declined 8.8 basis points to 4.19 percent, while the 2-year note yield fell 9.8 basis points to 3.461 percent, hitting a four-week low. Recruitment firm Challenger, Gray & Christmas reported that layoffs announced by U.S. employers surged in January to the highest level for that month in 17 years, citing lost business contracts and economic uncertainty.
Currency Markets React to Central Bank Decisions
The U.S. dollar index rose 0.26 percent to 97.94 as investors sought safety amid the equity market turmoil. In contrast, sterling weakened 0.86 percent to $1.3532 after the Bank of England narrowly voted to leave rates unchanged and signaled potential rate reductions ahead if anticipated inflation declines materialize.
Meanwhile, the European Central Bank maintained euro zone rates at 2 percent without providing immediate guidance on future moves, reinforcing market expectations of unchanged policy for the foreseeable future. The Japanese yen continued its four-day decline ahead of Sunday’s general election, with polls suggesting a decisive victory for Prime Minister Sanae Takaichi.
Commodities Face Renewed Pressure
Precious metals suffered steep losses as a stronger dollar and equity market volatility prompted widespread liquidation. Spot silver plunged 16.4 percent to $73.62 an ounce, while spot gold fell 3.14 percent to $4,806.58 an ounce, reversing gains from the previous two sessions.
Oil prices also declined sharply, with U.S. crude settling down 2.84 percent at $63.29 per barrel and Brent crude falling 2.75 percent to $67.55 per barrel. The decline followed news that the U.S. and Iran agreed to hold talks in Oman on Friday, easing concerns about potential Iranian crude supply disruptions.
Market participants will closely monitor the outcome of U.S.-Iran negotiations on Friday and Japan’s general election on Sunday for potential catalysts that could influence near-term market direction. The extent of further technology sector weakness remains uncertain as investors await additional corporate earnings reports and economic data.
