Live Markets: AI spending concerns overshadow steady economic data

Microsoft

Yesterday 13:12

Main US equity index futures red; Nasdaq 100 down ~1%
September PCE MM, YY in line with estimates; core MM, YY in line with estimates
Euro STOXX 600 index up ~0.7%
Dollar rises; gold, US crude, bitcoin all down >1%
US 10-year Treasury yield falls to ~5.00%
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AI SPENDING CONCERNS OVERSHADOW STEADY ECONOMIC DATA
S&P 500 futures are lower Thursday as economic data failed to offset renewed concerns about the growing cost of AI investment. 
That said, in the wake of the data, e-mini S&P 500 futures ESc1 have pared their losses slightly. The futures are now down around 0.3% vs. a loss of about 0.4% just before the data came out. Futures had already been under pressure after Alphabet's GOOGL.O earnings revived concerns about AI spending.
The latest economic reports were mostly in line with expectations. Headline PCE, the Fed's preferred inflation gauge, rose 0.5% in September, matching forecasts, while the annual rate came in at 3.6%, also in line with a Reuters poll estimate.
Core PCE, which strips out food and energy prices, likewise matched expectations. It rose 0.3% on the month and 3.1% from a year earlier.
Beyond inflation, the economy continued to show signs of resilience. Advance third-quarter GDP growth came in at 3.4%, topping the 3.2% Reuters poll estimate, while initial jobless claims of 194,000 were below the 198,000 estimate.
     
The reports did little to alter Fed rate expectations. According to CME's FedWatch tool, traders continue to see an 83% chance of a 25-basis-point rate hike at the Fed's December 8-9 meeting, unchanged from before the releases. The probability of rates remaining unchanged stood at 17%.
Further out, markets are pricing in about 67 basis points of additional tightening through the end of 2027, down slightly from around 70 basis points before the data.
Treasury yields are lower. The 10-year Treasury yield US10YT=RR is now around 5.00% from roughly 5.02% immediately before the releases and remains below Wednesday's close of 5.045%.
Beneath the index level, trading is more positive, with most S&P 500 sector ETFs higher. Healthcare XLV.P is among the strongest groups, up more than 2%, while communication services XLC.P is falling 1.8%, weighed down by Alphabet’s more than 10% slide. Regional banks are outperforming with the SPDR Regional Banking ETF KRE.P up roughly 0.7%, while semiconductor shares remain under pressure, sending the PHLX Semiconductor ETF SOXQ.O down 2%.
Here is a premarket snapshot from 9:04 a.m. ET:
(Terence Gabriel)
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EARLIER ON LIVE MARKETS:
LOOMING TECH THREAT CLICK HERE
AU REVOIR, MME LAGARDE CLICK HERE
EARNINGS DRIVE MIXED INDEX PERFORMANCE CLICK HERE
EUROPE BEFORE THE BELL: NO TIME FOR A BREATHER CLICK HERE
IN THE AI ALPHABET, CASH IS KING CLICK HERE
     

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own )