Hot inflation and an AI stocks selloff sank the Nasdaq 4.48% in the week of Oct. 12, while the Dow still eked out a gain. As Wall Street spent the week of October 12 learning that inflation is like a houseguest who promised to leave Sunday and is now asking for the Wi-Fi password. Hot inflation reports on consumer and producer prices revived Federal Reserve rate hike worries, and the AI trade suddenly looked like it had borrowed too much money for its own good.
The Nasdaq had its worst week since June, sliding 4.5%, while the Dow still finished higher. Investors did a lot of rotating, which is a polite way of saying they sold the exciting stuff and bought the boring stuff.
Oil Jumps As Chips Slip
Monday was a holiday for the bond market, closed for Columbus Day, but nobody told oil. Brent crude gained 1.84% to $106.65 a barrel and West Texas Intermediate rose 2.06% to $93.74 after President Trump announced an “energy ceasefire” between Russia and Ukraine and Ukrainian President Zelenskyy said Moscow had already violated it. Memory chip losses weighed on tech. Mostly, everyone was waiting on bank earnings and inflation data, like kids staring at wrapped presents.
Bank Earnings Open Mixed
Tuesday opened earnings season with the big banks, and the report cards were uneven. JPMorgan Chase posted a rare miss, earning $5.57 a share against the $5.90 analysts expected, on revenue of $50.91 billion versus $51.22 billion. It did raise its 2026 net interest income forecast to $106.2 billion, and the shares closed 0.9% lower. Goldman Sachs topped revenue expectations, yet its stock still dipped 0.2%, proof that an A-plus sometimes only earns a nod. Wells Fargo shed 3% on mixed numbers. The S&P 500 ended near flat after a steep overnight slide in South Korea pressured memory chip names.
Hot Inflation Hits AI Stocks
Wednesday’s consumer price index was the main event, and it arrived hot. Headline prices rose 3.7% from a year earlier and 0.6% in September alone, with more than half of the monthly increase tied to a 9.1% jump in gasoline. The CME FedWatch tool put the odds of an October rate hike near 37%, up from 22% on Tuesday. AI infrastructure stocks, which run on borrowed money and big dreams, took it on the chin. The iShares Semiconductor ETF fell another 4% for a seventh straight loss.
Producer Prices Heat Up
Thursday brought round two. Producer prices rose 1.3% in September and 6.3% from a year ago, the sharpest acceleration since 2022. Instead of panicking, investors rotated out of chip stocks into defensive names, and the Dow jumped 1.1% for its best day in more than a month. Nvidia CEO Jensen Huang calmed the AI crowd by defending CoreWeave’s financial health and saying Nvidia has no plans for a rescue. According to Yahoo Finance, since last Friday’s close the S&P 500 lost 152 points or 1.95%. The NASDAQ dropped 1,226 points or 4.48%. While the DOW increased 347 points or .67% to finish as the week’s lone winner.
AI Stocks Selloff Deepens
Friday featured Federal Reserve Chair Kevin Warsh at the IMF and World Bank meetings in Bangkok, sounding upbeat about U.S. economic strength and surprised by how well global economies are “hanging in there.” Markets increasingly expect the Fed to hold this month, while Barclays now sees quarter-point hikes in December and January. Stocks found little comfort. CoreWeave, whose bond yields topped 15% this week, and Broadcom led AI shares lower, the chip index fell for an eighth straight day, and oil jumped more than 3%. The Nasdaq lost 2.15% on the day.
It’s A Wrap
The lesson is that the AI boom runs on borrowed money as much as electricity, and hot inflation makes that money pricier. The Dow’s gain shows investors are not leaving the market, just changing seats. Earnings season shifts into gear next week with Tesla, Meta Platforms and Procter & Gamble, and analysts expect quarterly profits to surge more than 30%. If those numbers deliver, the Nasdaq may get its swagger back. If not, the boring stocks keep the good parking spots.
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