• The S&P 500 and Nasdaq Composite fell to five-week lows, last down 0.4% and 0.2%, respectively, as investors rotated out of AI and semiconductor stocks amid rising oil prices and rate uncertainty.
  • Thursday’s selloff was the Nasdaq’s worst since June, but market breadth remained positive, with 337 S&P 500 constituents advancing and the equal-weight index gaining 0.8%.
  • Oil prices surged on Middle East tensions, while strong labor-market data complicated the Federal Reserve’s policy path.

Tech Selloff Intensifies

The S&P 500 and Nasdaq Composite slumped to five-week lows on Friday, extending a sharp technology-led selloff that has rattled investors. The benchmarks were last down 0.4% and 0.2%, respectively, as trading resumed after Thursday’s rout, which saw the S&P 500 tumble 1.21% and the Nasdaq plunge 2.60%—its worst session since June. The Dow Jones Industrial Average, however, edged up 0.02% on Thursday, highlighting a stark divergence beneath the surface.

The retreat was concentrated in AI and semiconductor names, where sky-high valuations and rising financing costs have come under scrutiny. The Philadelphia Semiconductor Index fell 6.7% on Thursday and has lost roughly 15% this month, according to Schwab (SCHW). Nvidia (NVDA), the largest company on Wall Street by market value, dropped 4.4% and was the biggest single drag on the S&P 500. Meta Platforms (META) slid about 7% after reporting revenue above expectations but profit below forecasts, alongside plans for a new class of stock to fund AI investments. Tesla (TSLA) fell 3.1% despite stronger-than-expected quarterly profit, and CoreWeave (CRWV) tumbled 10.1% on concerns about debt used to finance Nvidia chips.

Despite the headline losses, market breadth was unusually positive. According to Schwab, 337 S&P 500 constituents rose on Thursday, and the equal-weight version of the index gained 0.8%. It was one of only five sessions since 1996 in which advancing stocks outnumbered decliners by more than 100 yet the index fell over 1%, the most recent comparable session being January 27, 2025. “The selling of companies with strong results suggests investors currently perceive the AI trade as too risky,” said Nathan Peterson, a strategist at Schwab.

Oil and Rates Add Pressure

The equity selloff was compounded by a jump in oil prices tied to escalating Middle East tensions. Brent crude was quoted at $114.02 a barrel early Friday, while U.S. crude stood at $100.60, according to AP. The surge raises concerns about renewed inflation and higher business costs. Union Pacific (UNP) flagged fuel-cost pressure, and Procter & Gamble (PG) warned that rising costs would increasingly weigh on profit.

Meanwhile, strong labor-market data—reflected in low unemployment claims—suggests economic resilience but gives the Federal Reserve less reason to ease policy while inflation remains elevated. Market-implied odds of an October rate increase stood at just 8% on Friday morning, versus 84% for an increase before year-end, according to Schwab. Those are changing market probabilities, not Fed commitments. The 10-year Treasury yield fell to approximately 4.97% on Thursday from 5.13% Wednesday as investors sought safe havens, before edging higher early Friday.

Global Markets Diverge

The international reaction was mixed. Early Friday, European indexes declined, and Japan’s Nikkei fell 0.3%, but South Korea’s Kospi gained 0.3%, Hong Kong rose 0.7%, and Shanghai gained 0.9%. Concerns over government debt and strained budgets across developed economies also lingered, with protests in France demanding more spending adding to fiscal worries.

The central debate in the coverage is whether AI spending will generate returns fast enough to justify valuations and debt—not whether AI demand has disappeared. “Easing bond-market stress could give equities room to recover and help narrow the performance gap between megacaps and the broader market,” said Kevin Gordon, another Schwab strategist. The next major tests are the Federal Reserve decision on October 28 and earnings from Microsoft (MSFT), Alphabet (GOOGL), and Amazon (AMZN) on October 28–29. GDP and personal-consumption-expenditures inflation releases on October 29 will also shape the rate outlook.

Correction: An earlier version of this article misstated the timing of the S&P 500 and Nasdaq declines. The figures refer to intraday trading on Friday, October 23, 2026, not closing prices.