The Dow plunged 1,800 points and the Nasdaq fell 5.46% into correction territory as AI regulation and data-centre fears wiped around $3 trillion from the S&P 500's market value.
Federal Reserve officials Beth Hammack and Thomas Barkin backed a gradual approach to raising rates, with Hammack saying policy will need a restrictive stance to bring inflation back to 2%.
AppLovin shares surged after the company beat earnings and guidance, even as the Nasdaq-100 sold off more than 6%.
IREN rebounded 18% in premarket action after an earnings beat, Cloudflare rose 15% and DraftKings fell 21% after cutting its outlook.
Morgan Stanley and Goldman Sachs each fell 6% and Citigroup dropped 5% in a broad selloff with no company news behind it.
Wall Street's AI rally hit a major roadblock on Thursday as fears of tighter regulation and slower data centre expansion sparked a selloff that wiped around $3 trillion from the S&P 500's market value. The Nasdaq Composite tumbled 5.46%, its biggest one-day fall in 19 months, pushing the index into correction territory, while the Dow plunged 1,800 points. Major chipmakers including Nvidia saw significant losses.
IREN shares rebounded 18% in Friday's premarket action after the neocloud company reported earnings showing a near tripling of AI cloud revenue and said it had secured a five-year contract. Cloudflare rose 15% after its fastest sales surge in nearly four years, and Airbnb rose nearly 12% after better-than-expected quarterly results and a raised full-year outlook. DraftKings fell 21% after cutting its outlook, Atlassian fell 13% on a disappointing revenue outlook, and Lyft fell nearly 8% after earnings were hit by legal, tax and regulatory reserve charges and settlements.
All three major US averages fell sharply on Thursday, with the Nasdaq Composite down 5% below 24,300 and in correction territory at its lowest level since April, while the S&P 500 fell over 4% to three-month lows. In the evening session JFrog rose 20.9%, Cloudflare 14.1% and Airbnb 10.6% after earnings, while DraftKings fell 23.1% and Atlassian 17.6%. Unity Software rose 6.8% on talks of being acquired by Silver Lake.
Federal Reserve officials Beth Hammack and Thomas Barkin made the case for a gradual approach to raising interest rates, signalling policymakers remain focused on bringing inflation under control. Hammack said she expects monetary policy will need to move to a restrictive stance to bring inflation back to 2% in a timely manner. Their comments were the first from Fed officials after Democrats won control of Congress and made gains in state-level elections.
AppLovin shares spiked to three-month highs after the software company beat earnings and guidance, even as the Nasdaq-100 sold off more than 6%. The segment reviewed several analyst upgrades for AppLovin and discussed its outlook amid the steep technology selling.
The morning briefing listed analyst rating actions, including Morgan Stanley raising its rating on Cinemark and cutting Cisco Systems. Barclays cut Skyworks, Truist Securities cut Nike and Deutsche Bank raised JetBlue, while Morgan Stanley also raised Acadian Asset Management.
Qualcomm shares fell after it guided to earnings of $2.15 to $2.35 a share for the three months ending in December and revenue of $10.4 billion to $11.2 billion. Arm Holdings fell after forecasting revenue of about $1.54 billion in its fiscal third quarter. AppLovin jumped after third-quarter results beat expectations and its outlook topped the analyst consensus, while Zillow fell after weaker-than-expected results and a signal that adjusted earnings in the next quarter could be the weakest in three years.
Zillow was moving after posting weaker-than-expected results and signalling that adjusted earnings in the next quarter could be the weakest in three years. Expedia shares dropped even after the online travel agency raised its full-year outlook, because the midpoint of its fourth-quarter gross bookings forecast trailed the average analyst estimate. Dutch Bros shares sank after the coffee chain cut its adjusted Ebitda forecast for the full year, missing the average analyst estimate.
Airbnb posted its fastest revenue gain in three years, with third-quarter revenue up 19% to $4.87 billion, above the highest Bloomberg estimate, and lifted its full-year adjusted Ebitda margin forecast to about 36%; the shares fell in extended trading. IonQ raised its 2026 revenue outlook to as much as $515 million from a range of $450 million to $460 million after buying SkyWater Technology, as third-quarter revenue more than quadrupled year on year. Axon shares slid 20% after hours as it forecast revenue of about $3.61 billion to $3.63 billion against an estimate of $3.71 billion.
Stock futures were mixed on Thursday as investors rotated away from technology and AI-related shares, with S&P 500 futures up 0.05%, Nasdaq futures down 0.90% and Dow futures up 0.65% in premarket trading. AppLovin rose 22% after its earnings, while Qualcomm fell 11% and Zillow Group fell 9%. Oil prices rebounded modestly after plunging more than 8% on Wednesday.
Morgan Stanley fell 6% today, with Goldman Sachs down 6% and Citigroup off 5%, in a broad selloff with no company news behind it. Equities and fixed income trading brought in $7.8 billion of Morgan Stanley's $20.3 billion of third-quarter revenue, nearly two-fifths, compared with $10.3 billion of $50.9 billion at JPMorgan Chase, which fell a smaller 4%. Robinhood Markets fell 10%.
The Nasdaq fell 4.5% into correction territory as Big Tech extended its post-midterm selloff on fears data centres may face severe delays. AppLovin surged 30.3% after third-quarter revenue jumped 55% year over year to $2.18 billion against $2.07 billion expected, net income rose 72% to $1.44 billion and it guided fourth-quarter revenue to $2.365 billion-$2.395 billion. Tapestry rose 10.3% on raised guidance, Motorola Solutions gained 6.2% after revenue of $3.38 billion and Qualcomm fell 9.1%.
Shares of banks and other financial institutions fell sharply as traders braced for a popping of the AI bubble. Shares of investment firms that have extended credit to or invested in data-centre developers and software makers dropped, with Blackstone, Blue Owl, KKR and Apollo Global each falling by 3% or more. Investment bank owners such as Goldman Sachs Group and Morgan Stanley tumbled amid fears that the market selloff would slow deal activity.
Uber Technologies rallied on earnings even though the rideshare company posted mixed results, and Block closed as one of the top performers in the S&P 500. Qualcomm and AppLovin reported their earnings after Wednesday's close.
AppLovin stock rose 30% to $353.50 and was the best-performing stock in the S&P 500 on Thursday after the mobile advertising platform reported better-than-expected third-quarter results. Unity Software shares rose 15% after strong third-quarter growth in its advertising business driven by its Vector AI system. The moves came as the Nasdaq Composite fell 5.1% on worries over potential data centre moratoriums after the midterms.
Jim Cramer's Charitable Trust bought 10 shares of Goldman Sachs at roughly $867, raising its holding to 160 shares and the portfolio weighting to 3.6% from 3.4%. The club said Goldman shares are down roughly 7% on concerns that pushback against data centres could mean fewer AI-related IPOs and fundraising deals, and it cited the stock's 2.3% dividend yield and quarterly share repurchase program. It added that it is also interested in adding to its Boeing position.
Sezzle rose 30% after third-quarter revenue and transaction volume surged and full-year guidance was raised for the fourth time, and AppLovin rose 22% after a third-quarter profit beat with revenue $100 million above the top of the company's forecast. Unity Software rose 20% on its strongest quarter on record with Vector revenue up 126% and its first GAAP profit since its IPO, while Qualcomm was among the decliners.
US stock futures split as the post-election rally cooled, with Dow futures up 0.4%, S&P 500 futures down 0.1% and Nasdaq-100 futures down 0.7%. Brent crude fell to $94 per barrel and WTI to $88 per barrel amid hopes President Trump would pursue a deal with Iran. Initial jobless claims and a Challenger, Gray & Christmas report were due ahead of Friday's employment report.
Five US stocks gained 14% to 31% on Thursday or after hours as the Nasdaq fell 5.52%, each lifted by fresh earnings. AppLovin closed up 31.04% at $356.10 after third-quarter revenue rose 55% to $2.18 billion and it guided fourth-quarter revenue to $2.365 billion to $2.395 billion, above the $2.25 billion analysts expected. Warby Parker rose 22.55% after revenue climbed 10.4% to $244.7 million, EPAM Systems gained 21.55% after adding $1.5 billion to its buyback authorization, and Cloudflare jumped at least 14% after the bell as third-quarter revenue rose 39% to $782.5 million.
The Treasury Borrowing Advisory Committee told the Treasury Secretary that Treasury markets have repriced toward a higher path for interest rates, with two-year yields rising by roughly 50bps and ten-year yields by roughly 40bps. Ten-year yields peaked around 5.4% and thirty-year yields around 5.7% in early October, and some of that increase has since reversed. The committee cited stronger economic activity, persistent energy-supply disruptions and the Federal Reserve's initial rate hike and projections for further increases.
