US stocks rebound with AI earnings test ahead, euro falls on France unrest
Meta is one of five AI hyperscalers expected to increase combined capital expenditure to about $1.2 trillion next year, according to Goldman Sachs.
The Nasdaq rose more than 1% on Monday as tech shares rebounded ahead of a big week for AI-related earnings, while European stocks and the euro fell as unrest in France added to concerns about the country's fiscal outlook. French bonds and Paris-listed stocks also fell as the widespread protests across France underscored the difficulties the government faces in reducing its large deficit. France's central government asked some local authorities to impose curfews as it faced pressure over security failings on Monday, after looting stemming from the protests.
Tech stocks on Wall Street recovered some ground after a bruising week, with an index of semiconductors up 1.6%. On Friday, the index sank in its eighth straight day of declines, its longest losing streak since 2008. With results due from Meta on Wednesday, and results from Tesla and chipmakers Lam Research and Texas Instruments also due this week, investors will be watching for signs that massive AI spending ultimately pays off.
"Investors are buying the correction dip that we had," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "The market is now going to go through a very critical test over the next two weeks. We have some big-name earnings coming out," he said. "In terms of technology, the test of whether or not the spending on AI... will be met with satisfaction is going to be critical."
The Dow Jones Industrial Average fell 36.38 points, or 0.07%, to 51,966.03, the S&P 500 rose 31.29 points, or 0.41%, to 7,690.73 and the Nasdaq Composite rose 290.85 points, or 1.11%, to 26,430.89. MSCI's gauge of stocks across the globe rose 0.88 points, or 0.08%, to 1,129.98. Meta is one of five AI hyperscalers expected to increase combined capital expenditure to about $1.2 trillion next year, according to Goldman Sachs.
Results from SpaceX are also due on Tuesday. Overall, US earnings are still expected to rise about 30%, largely driven by growth in the technology sector. US Treasury yields rose on Monday, with the benchmark 10-year Treasury yield coming off its biggest weekly drop in seven months, as concerns about the impact of higher interest rates on AI stocks abated. The yield on the benchmark US 10-year Treasury note was up 4.2 basis points at 5.14%.
The recent bond selloff had also intensified scrutiny of the AI sector's massive funding needs. In economic data, the National Association of Home Builders/Wells Fargo Housing Market index on Monday showed a drop of three points to 29 this month, the lowest level since June 2012 and below the 31 estimate of economists polled by Reuters. Recent comments from Federal Reserve officials, including Chair Kevin Warsh, suggest policymakers are in no rush to hike rates again.
On Friday, Warsh expressed optimism about US economic strength but gave no indication of whether or when more hikes will be needed. EUROPEAN STOCKS, EURO FALL The pan-European STOXX 600 index fell 0.8%, while France's blue-chip CAC 40 index dropped 1.1%. France's 10-year yield earlier was up 13 basis points to 4.9% while the German 10-year yield, the benchmark for the euro zone, was also higher. The spread between French OATs and safe-haven German Bunds has widened to 147 basis points, trading at levels last seen during the 2011 to 2012 European debt crisis, from around 110 bps in late September.
Widespread weekend unrest in the euro zone's second-largest economy underscored the challenge facing the French government as it seeks to reduce its large budget deficit ahead of next year's presidential elections. The euro fell 0.24% to $1.1212. The US dollar was boosted by the rebound in tech stocks. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.17% to 101.97.
Meanwhile, the Australian dollar rose 0.49% versus the greenback after data showed China's economic growth rebounded from three-year lows, expanding at a 4.5% annual pace in the third quarter. Oil prices were mixed, with investors digesting attacks by Yemen's Iran-aligned Houthis on a Yemeni military training camp and renewed attacks on Saudi energy, airport and military facilities. Brent crude futures fell 31 cents to settle at $109.55 a barrel.
Brent fell more than $3 earlier in the session. US West Texas Intermediate gained $2.25 to $103.66 a barrel, the highest settlement since September 15. Spot gold fell 0.61% to $4,139.67 an ounce.
