Last Thursday’s selloff in the stock market was an AI selloff. Investors dumped companies that build, wire, and power data centers, following the Democrats’ sweep of Congress amid voter hostility toward new facilities. Stocks recovered some ground on Friday. October payrolls rose by 165,000, beating expectations of 65,000. Still, the S&P 500 ended the week down 2.7%, and Information Technology (MW) fell 6.9% (chart).
Energy (OW) was the worst-performing sector this week, down 11.9%, for a different reason. Oil prices tumbled on hopes of a US-Iran peace deal following the midterm elections. We are retaining our overweight recommendation on Energy as a hedge against re-escalation. Consumer Discretionary (UW) and Communication Services (MW) led the week, up 2.7% and 2.3%.
The market is pricing the AI backlash as a roadblock. We see a speed bump. Investors have already cut the multiples of the build-out’s suppliers. Analysts have yet to cut their earnings estimates. That is the next test. We are not changing any of our sector weights. Here’s more on Information Technology, Industrials, and Utilities:
Source: www.yardeniquicktakes.com
