US Stocks Fall as AI Fears and Geopolitical Pressures Shake Markets

United States stock markets experienced a significant downturn on Thursday, driven by growing anxiety regarding the sustainability of artificial intelligence investments and geopolitical concerns in the Middle East. The tech-heavy Nasdaq Composite Index dropped 2.3% to its worst performance since June, while the S&P 500 Index fell 1.3%. The market sell-off followed comments from President Donald Trump reiterating the possibility of new military action against Iran and stating that the United States is not currently negotiating with the country.

The risk-off sentiment was amplified by mixed corporate earnings and capital expenditure reports from major technology firms. Meta Platforms shares declined 7% despite beating revenue expectations as investors focused on rising AI infrastructure costs. Tesla shares dropped 3% after cutting its capital spending outlook, while chipmaker Lam Research suffered a steep decline of nearly 12% due to supply-constrained guidance. Nvidia CEO Jensen Huang noted that capital for artificial intelligence infrastructure remains scarce, further fueling market jitters.

Despite the heavy losses in technology and communication services sectors, market action showed stark bifurcation. Defensive sectors drew considerable capital as investors sought safer alternatives. Consumer staples jumped 3.1% to reach an all-time high, propelled by strong gains from companies like Procter & Gamble. The health care sector also touched record levels despite a notable drop in pharmaceutical firm Moderna following reports of leaked clinical trial data for an experimental cancer vaccine.

Bond markets emerged as a primary beneficiary of the flight to safety, with Treasury yields dropping sharply. The 10-year US Treasury yield fell 19 basis points to 4.95%, marking its largest single-day decline since August 2025 and closing below 5% for the first time in weeks. Money markets adjusted expectations for Federal Reserve monetary policy, pricing in lower odds of near-term interest rate hikes ahead of the central bank's upcoming meeting on October 28.

Cryptocurrency markets mirrored the broader risk-off environment, with Bitcoin extending daily losses to 3% and hovering below $82,000. Price tracking from TradingView showed Bitcoin testing the cost basis of US spot exchange-traded funds around $81,500. Analysts suggest that digital assets may remain range-bound until the Federal Reserve delivers its next interest rate decision, while precious metals also suffered heavy losses as gold and silver experienced a broad sell-off.

In legal developments related to financial markets, a federal court in Louisiana ordered New Orleans forex figure Michael B. DePetrillo and his companies to pay a civil monetary penalty of over $9 million. The default judgment concluded a civil fraud case brought by the Commodity Futures Trading Commission regarding an unregistered currency-trading investment pool. DePetrillo was previously sentenced to nine years in prison after pleading guilty to violating the Commodity Exchange Act.