There are two major worries weighing on Wall Street these days. Both are starting to reach a fever pitch.
On one side are concerns about the sustainability of the artificial-intelligence spending boom. On the other: the ever-looming threat of rising inflation thanks in large part to persistent conflict in the Middle East.
Major U.S. indexes whipsawed this week on a grab bag of related anxieties, from soaring oil prices to outsize AI spending and the capital required to foot that bill. Those fears on Thursday sent the Nasdaq composite to one of its worst days of 2026, while on Friday Brent crude vaulted to some of its highest year-to-date levels.
The S&P 500 ended the week 0.5% lower, while the Nasdaq dropped 0.7%. The Dow industrials edged 0.4% higher on the week. On Friday, the Dow led indexes lower, falling 1.2%, or 653 points, while Nasdaq fell only 0.2%.
The week was the latest installment of a choppy trading stretch that has kept stocks more or less in place since the end of the summer, as a pivotal midterm election and the rest of the third-quarter earnings season loom.
One factor driving recent swings: investors' nerves about tech companies' huge AI-focused spending spree. Earlier this past week, positive developments at major players such as SpaceX and Anthropic juiced optimism. Traders set aside their concerns to send shares of Advanced Micro Devices, Nvidia and Tesla higher.
The tide turned on Thursday, after Meta Platforms said it would create a new class of nonvoting stock to raise the capital needed for developing and serving AI models. That left Wall Street wondering if the Facebook parent -- and its peers -- could secure enough capital to fund the build-out.
"More and more these [AI] infrastructure-related investments are driven by debt. At the same time you have rates rising," said Michael Feldman, portfolio manager at ClearBridge Investments. "That's posing some questions around 'If rates keep going higher, how much more can these companies borrow?'"
After a punishing bond rout over the past two months propelled the 10-year Treasury yield well above 5%, Thursday's tech fears sent investors fleeing for the perceived safety of government bonds. Treasury yields, which fall when prices rise, saw their biggest one-day drop in three years. The 10-year yield finished the week at 4.987%.
That was reassuring for fixed-income traders. "For a bond guy like me...it's good to see," said Vincent Ahn, president and portfolio manager at SLW Investments. "It's sort of a relief."
The declines might prove temporary. On Friday, the focus was on a different threat to stocks: global benchmark oil prices climbed back to levels last seen in April, as traders bet on renewed fighting in Iran after the election.
That put the focus back on the threat of inflation, tugging Treasury yields higher. Rising fuel costs have already scrambled interest-rate forecasts this year, eventually leading the Federal Reserve to raise interest rates for the first time in three years. Economists have warned that the longer that oil prices remain elevated, the greater the threat to the U.S. economy.
At the end of the week, those concerns were brought to the fore. Stocks in sectors that are sensitive to economic shifts, including banks and industrial firms, were among those leading losses in the S&P 500. Consumer-related stocks from Home Depot to Nike, Coca-Cola and McDonald's all fell more than 1.6% Friday.
Even as tech stocks recovered on Friday, bonds of AI-related companies continued to struggle. The extra yields, or spreads, that investors demand to hold the bonds of Oracle, SpaceX and Meta Platforms climbed again -- extending their sharp gains over the past two weeks.
Investors have said there are reasons to believe that stocks can advance through the end of the year -- one being the boom in third-quarter profits that American companies are expected to report in the coming weeks. Next week brings a much-awaited Fed meeting, but most traders expect central bankers to hold off on increasing rates until later meetings.
But geopolitical tensions and AI jitters are likely to weigh on share prices in the near term, Feldman said. "There's just a lot more debate about the sustainability and duration of the AI infrastructure build-out," he said. "We're going to need some more proof points as everyone gets through earnings when it comes to the return on investments."
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