US stocks ended the week lower, with the Dow falling more than 650 points on Friday whilea major US financial company cuts jobs citing AI as the reason.
The Dow Jones Industrial Average fell 652.82 points, or 1.23%, to 52,215.16 on Friday. The S&P 500 slipped 0.52% to 7,623.68, and the Nasdaq Composite lost 0.21% to 25,955.34. For the week, the S&P 500 fell 0.5% and the Nasdaq 0.7%, while the Dow gained 0.4% despite Friday’s drop.
Friday’s selling was broader than Thursday’s tech-led fall. Defensive sectors that usually hold up in weak markets, such as consumer staples, utilities and healthcare, also declined. Higher oil prices were the main drag, with crude rising again on tensions in the Middle East.
AI reason for job cuts
The day’s most significant corporate news came from American Express. The card company said it would cut about 5% of its global workforce, saying it needed to prepare for AI. Its shares fell more than 3%, and with Caterpillar and Goldman Sachs also lower, that weighed heavily on the Dow.
For two years, discussion of AI has focused on how much companies spend on data centres and chips. A major financial services company is now citing AI as a reason to reduce staff. If other large employers follow, AI’s effect on jobs will become a bigger issue for policymakers and for consumer spending, which drives most of the US economy.
It also matters for India. Large US financial companies such as American Express are among the biggest clients of Indian IT and business process outsourcing firms. If they automate work in-house, some outsourced work may shrink. That fits with Infosys’ comment that AI is reducing the cost of some services even as it creates new projects.
Money moves away from AI stocks
Within the market, money is moving out of the AI trade. CNBC data shows an index of S&P 500 stocks excluding AI-related companies was up about 6.6% in October, while the overall S&P 500 was down about 0.4%. Investors are moving away from the expensive AI leaders towards companies they see as better value or less exposed to questions about AI spending. Cybersecurity stocks were a bright spot on Friday, with Palo Alto Networks, Cloudflare and SailPoint each up more than 7%.
Next week
The Federal Reserve meets on 27–28 October. With oil high, markets expect it to leave rates unchanged rather than cut. The US midterm elections follow on 3 November, and there are reports that renewed US–Israeli action against Iran could come after the vote, which would raise oil supply risks further.
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