"Wall Street Challenge" last Friday (16th) saw U.S. stocks rise initially before falling, with all three major indices ultimately under pressure. The Dow dropped 0.3%, while the S&P 500 and Nasdaq fell 1.1% and 2.1% respectively. The market has started reassessing interest rates and growth outlook, with semiconductor and AI-related stocks becoming the main targets of selling. The Philadelphia Semiconductor Index declined for the eighth consecutive trading day, dropping another 3.8% on the day.
*Inflation data higher than expected*
Inflation data released last week for September showed that price pressures in the U.S. remain more persistent than expected. CPI, core CPI, and PPI all exceeded market expectations, indicating that cost pressures are not easing as quickly as hoped. The market is concerned that the pace of disinflation may be slower than anticipated. However, high prices have not significantly impacted economic activity yet, as September retail sales far surpassed expectations, indicating that consumer demand remains robust.
Recent statements from Federal Reserve officials have maintained a hawkish stance. San Francisco Fed President Daly indicated that further policy tightening remains possible in the future, but there is no need to rush action at the upcoming meeting at the end of this month; Cleveland Fed President Mester warned that if inflation expectations rise again, the Fed may need to take more aggressive measures.
Fed Chair Powell did not provide pre-meeting guidance, merely reiterating that monetary conditions were further tightened in September, and subsequent economic performance has largely met expectations. He pointed out that the U.S. is undergoing a broad investment cycle, not limited to the AI sector, and once again emphasized the importance of price stability. I maintain my original view that the Fed will hold interest rates steady in October, but will still raise rates by 0.25 percentage points in December.
*Market begins to worry about side effects of high interest rates*
Over the past few months, investors generally believed that the U.S. economy could withstand a high-interest-rate environment, so even as rate hike expectations intensified, risk asset prices continued to rise. However, market thinking began to shift this week, as investors start worrying that the longer high interest rates persist, the greater the risk of a future economic slowdown. Recent stock market pressure and falling long-term Treasury yields reflect this change in market focus.
*CoreWeave incident sparks AI risk discussion*
Besides interest rate factors, warning signs have also emerged in the AI supply chain. Credit default swap (CDS) premiums for AI cloud services provider CoreWeave (US.CRWV) surged to record highs, triggering market concerns about the financing model for AI infrastructure. Although NVIDIA (US.NVDA) CEO Jensen Huang publicly expressed support for CoreWeave's prospects, the incident shows that market focus is gradually shifting from AI demand growth to cash flow, financing costs, and debt repayment capacity.
This week, the Fed enters its pre-meeting blackout period. Market focus will shift to housing starts, building permits, PMI, and initial jobless claims data. If data continue to show economic resilience, expectations for prolonged high interest rates may be further reinforced. Whether credit risks in the AI supply chain will continue to spread will also become a key indicator affecting tech stock performance; corporate earnings performance is also worth watching.
*Nebius outlook unchanged, potential for phased deployment ahead*
We previously introduced Nebius (US.NBIS), noting it as a more aggressive investment option within the AI sector. As the market broadly categorizes it alongside CoreWeave as an AI infrastructure stock, its share price was dragged down by the latter's turmoil last week.
However, I believe the two cannot be directly compared. CoreWeave has rapidly expanded in recent years through large-scale financing, representing a typical high-leverage model. In contrast, Nebius not only provides AI computing power services but also actively develops cloud platforms and software ecosystems, resulting in a more diversified business structure.
As the market begins to place greater emphasis on balance sheets and capital returns, Nebius's more stable financial structure becomes an advantage. In the short term, Nebius's share price is expected to remain highly volatile. Aggressive investors are advised to first observe whether the stock can form a clear bottoming signal before considering phased deployment.
Watch the video now: https://media.etnet.com.hk/video/content/news/usstocks/usstocksfeature/2026/10/20102026_kw_aa.mp4
By Winston Wan, Council Member, Hong Kong Securities Analysts Association
*The author is not a licensed person under the SFC and does not hold any of the mentioned recommended stocks.
*Articles published by ETNET, whether signed or unsigned, represent the authors' personal opinions and do not reflect ETNET's position. ETNET's role is to provide a free speech platform.
*Inflation data higher than expected*
Inflation data released last week for September showed that price pressures in the U.S. remain more persistent than expected. CPI, core CPI, and PPI all exceeded market expectations, indicating that cost pressures are not easing as quickly as hoped. The market is concerned that the pace of disinflation may be slower than anticipated. However, high prices have not significantly impacted economic activity yet, as September retail sales far surpassed expectations, indicating that consumer demand remains robust.
Recent statements from Federal Reserve officials have maintained a hawkish stance. San Francisco Fed President Daly indicated that further policy tightening remains possible in the future, but there is no need to rush action at the upcoming meeting at the end of this month; Cleveland Fed President Mester warned that if inflation expectations rise again, the Fed may need to take more aggressive measures.
Fed Chair Powell did not provide pre-meeting guidance, merely reiterating that monetary conditions were further tightened in September, and subsequent economic performance has largely met expectations. He pointed out that the U.S. is undergoing a broad investment cycle, not limited to the AI sector, and once again emphasized the importance of price stability. I maintain my original view that the Fed will hold interest rates steady in October, but will still raise rates by 0.25 percentage points in December.
*Market begins to worry about side effects of high interest rates*
Over the past few months, investors generally believed that the U.S. economy could withstand a high-interest-rate environment, so even as rate hike expectations intensified, risk asset prices continued to rise. However, market thinking began to shift this week, as investors start worrying that the longer high interest rates persist, the greater the risk of a future economic slowdown. Recent stock market pressure and falling long-term Treasury yields reflect this change in market focus.
*CoreWeave incident sparks AI risk discussion*
Besides interest rate factors, warning signs have also emerged in the AI supply chain. Credit default swap (CDS) premiums for AI cloud services provider CoreWeave (US.CRWV) surged to record highs, triggering market concerns about the financing model for AI infrastructure. Although NVIDIA (US.NVDA) CEO Jensen Huang publicly expressed support for CoreWeave's prospects, the incident shows that market focus is gradually shifting from AI demand growth to cash flow, financing costs, and debt repayment capacity.
This week, the Fed enters its pre-meeting blackout period. Market focus will shift to housing starts, building permits, PMI, and initial jobless claims data. If data continue to show economic resilience, expectations for prolonged high interest rates may be further reinforced. Whether credit risks in the AI supply chain will continue to spread will also become a key indicator affecting tech stock performance; corporate earnings performance is also worth watching.
*Nebius outlook unchanged, potential for phased deployment ahead*
We previously introduced Nebius (US.NBIS), noting it as a more aggressive investment option within the AI sector. As the market broadly categorizes it alongside CoreWeave as an AI infrastructure stock, its share price was dragged down by the latter's turmoil last week.
However, I believe the two cannot be directly compared. CoreWeave has rapidly expanded in recent years through large-scale financing, representing a typical high-leverage model. In contrast, Nebius not only provides AI computing power services but also actively develops cloud platforms and software ecosystems, resulting in a more diversified business structure.
As the market begins to place greater emphasis on balance sheets and capital returns, Nebius's more stable financial structure becomes an advantage. In the short term, Nebius's share price is expected to remain highly volatile. Aggressive investors are advised to first observe whether the stock can form a clear bottoming signal before considering phased deployment.
Watch the video now: https://media.etnet.com.hk/video/content/news/usstocks/usstocksfeature/2026/10/20102026_kw_aa.mp4
By Winston Wan, Council Member, Hong Kong Securities Analysts Association
*The author is not a licensed person under the SFC and does not hold any of the mentioned recommended stocks.
*Articles published by ETNET, whether signed or unsigned, represent the authors' personal opinions and do not reflect ETNET's position. ETNET's role is to provide a free speech platform.
