US equity indexes ended the week with mixed results after the AI investment theme weakened following key corporate earnings reports, prompting a shift in capital toward defensive sectors and government bonds. Meta Platforms (META) results were a primary driver of this sentiment shift, as the company reported a $9.89 billion litigation settlement charge and increased its capital expenditures guidance by $5 billion at the lower end. These figures contrasted with the strong earnings from Space Exploration Technologies (SPCX) and Super Micro Computer (SMCI), which had previously supported risk sentiment in the market.
The S&P 500 finished at 7,623.68 on Friday, down from 7,659.44 the previous week. The Nasdaq Composite closed at approximately 25,955.24, compared to 26,140.03 a week earlier. The Dow Jones Industrial Average ended at 52,215.16, up from 52,002.41 in the prior week. Sector performance reflected the rotation away from growth stocks; communication services was the worst performer, and technology also closed lower for the week. Conversely, healthcare, energy, and real estate led the gains among major sectors.
Bond yields moved in response to the equity market volatility. Yields for two-, 10-, and 30-year Treasuries fell after investors moved away from AI-related stocks following quarterly results from Meta, Tesla (TSLA), Lam Research (LRCX), and Netflix (NFLX). A note from Stifel observed that Treasury yields appear to be finding relief as capital seeks traditional havens amid international uncertainty. The note cited escalating unease in France and renewed concerns regarding an AI-related slowdown as contributing factors.
Energy markets remained under pressure from geopolitical risks. Brent crude traded above $117.00 per barrel during the week. Rystad Energy noted that a geopolitical risk premium is persisting across crude and product markets, driven by Houthi attacks on Saudi infrastructure, new Iranian strikes on shipping in the Strait of Hormuz, and the end of the Russia-Ukraine energy truce.
Tensions in the Middle East continue to escalate on the diplomatic and military front. The New York Times reported that the United States and Israel have mapped out plans for fresh strikes on Iran next month. In response to potential renewed attacks, Iran's Islamic Revolutionary Guard stated that Tehran could invade neighboring countries and target bases used in US military operations, according to Al Jazeera.