Stocks edge lower as dollar heads for weekly loss

On Friday, global stocks dipped slightly as markets stabilized following a sharp decline in technology shares, while the US dollar faced its weekly decline. The tech sector saw heavy losses due to investor concerns over higher interest rates and the debt-driven financing of the AI boom. Traders grew optimistic about additional US interest rate hikes following stronger-than-anticipated inflation data on Wednesday. Consequently, investors shifted their focus toward Treasuries and other government bonds.

The S&P 500 and Nasdaq were both down, edging closer to weekly losses, whereas the Dow Jones remained flat but anticipated a weekly gain. Within the technology and communication services sector, losses were prominent, with coreWeave shares plummeting 9% on the day and poised to lose nearly 23% this week due to increased scrutiny of the financing for the expansive AI infrastructure buildout.

The Dow Jones Industrial Average gained 0.01%, the S&P 500 slipped 0.61%, and the Nasdaq Composite fell 1.3%. The MSCI World Equity Index also declined 0.10%, marking another weekly loss. European stock indices, which experienced less turbulence the previous day, performed better, with the STOXX 600 rising 0.67%. London's FTSE 100 increased by 0.38%.

Tom Plumb, a portfolio manager at Plumb Balanced Fund, expressed uncertainty about the financing capabilities of data centers and companies, emphasizing the importance of liquidity. He noted that some significant winners would emerge but stressed the need for caution regarding liquidity issues. Asian stocks generally rose, and bond markets steadied, with investors reversing some of the previous session's moves.

Meanwhile, the dollar index declined 0.23%, signaling its first weekly decline after four weeks of gains, primarily due to lower Treasury yields reducing the currency's attractiveness. This downward trend could be exacerbated by further concerns about the AI sector. The euro gained 0.10% against the US dollar, while the Japanese yen strengthened by 0.04%. European government bond yields edged higher, whereas US bond yields fell.

Despite these fluctuations, yields remained subdued as investors sought the relative safety of government debt amidst worries about AI-related companies' finances. G7 government bond markets were poised for their strongest weekly performance since late May. Brent crude futures increased by 0.85% to $106.83 a barrel, on track for a second consecutive weekly gain, fueled by concerns over Middle East supply disruptions.

Additionally, gold benefited from the dollar's weakness, climbing 0.17% to approximately $4,177.14 per ounce.