AI Anxiety Drives Another Volatile Session

Stocks recovered from early losses to finish marginally higher, but the tone remains fragile following last week’s tech-led pullback. Investors continue to grapple with the evolving AI narrative, balancing strong earnings and infrastructure investment against disruption risks and rising scrutiny of capital spending. Beneath the surface, sector rotations remain sharp, while commodities and crypto saw renewed pressure. Attention now shifts to Friday’s PCE inflation and GDP data for macro direction.

Key Headlines & Market Movers:

• AI Disruption vs. Return on Investment: The AI story is shifting from broad optimism to sharper selectivity. Investors are increasingly questioning which companies benefit versus those vulnerable to disruption, particularly in software and services. At the same time, there’s growing skepticism about how quickly AI spending converts into profits. That tension is fueling sector-level volatility.

Big Tech Capex and Credit Market Signals: Mega-cap names like Microsoft, Meta Platforms, Alphabet, and Amazon remain committed to aggressive AI investment, but investors are watching cash flow and balance sheets more closely as spending accelerates. Credit markets are beginning to hedge against rising leverage risk. The debate now centers on sustainability, not ambition.

• Macro on Hold, Commodities and Crypto Under Pressure: Economic data was secondary today, but that may change quickly. Friday’s PCE inflation and GDP reports could reset expectations ahead of the next Fed meeting. Rates remain steady for now, with policymakers signaling patience. Meanwhile, weakness in gold, silver, and Bitcoin reflects broader risk recalibration.

S&P 500 Sector Performance

Looking Ahead

Looking ahead, markets are likely to remain headline-driven as investors balance AI-driven disruption fears with still-resilient economic data. Friday’s PCE inflation and GDP reports could either steady sentiment or reinforce rate uncertainty heading into the next Fed meeting. In the near term, volatility may persist as positioning adjusts and leadership narrows further. Longer term, clarity around earnings durability and the payoff from AI investment will be key to restoring conviction and sustaining the broader uptrend.

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