AI Trade Faces a Reality Check 10/14/26

SPEAKER_1 (0:00)

Now is your time to get into a new DR. Horton home by taking advantage of its national Red Tag sales event going on right now through Sunday, November 1st. Stop by any of its participating communities and find select Red Tag homes at incredible pricing. So whether you're buying your first home or looking for an upgrade, you don't want to miss the Red Tag sales event going on right now. Discover the DR. Horton difference. Tap your screen now or visit drhorton.com. DR. Horton, America's builder and equal housing opportunity builder.

SPEAKER_2 (0:30)

At Edward Jones, we believe rich isn't about having life all figured out. It's opening yourself to all the possibilities. That's why your dedicated financial advisor provides long-term planning built around you, meeting you where you are and helping you get closer to where you want to be. So no matter where you're starting from, you can move forward with confidence. The key to being rich is knowing what counts.

Let's find your rich. Edward Jones, member SIPC.

Melissa Lee (1:00)

The bell's ringing into the trading day. Ring the bell at the NYSE, Warburg Pincus CEO, Jeffrey Perlman. He'll be joining us in just a few minutes and at the Nasdaq EverNorth doing the honors. Welcome to Closing Bell Overtime. I'm Melissa Lee along with Mike Santoli. Stock's getting hit hard today, especially technology without losing about 50 points, but the S&P 500 down 1 percent, the Nasdaq 100 down 2 percent.

Michael Santoli (1:24)

Concerns about too much spending and too much debt related to AI. The big pressure point here, Oracle down 9 percent, CoreWeave getting crushed on concerns about financing its debt. The Mag 7 needs all lower except for Apple, which continues to trade counter to the trend and closing above that $5 trillion level for the first time. A big reversal in bond yields today, jumping when the CPI report was higher than expected and released, but way off the intraday highs.

Melissa Lee (1:50)

With nowhere to hide in tech, money is moving into health care. Lilly gaining 4%.

Is this just about market mechanics? We'll talk to a health care analyst about the move, but first we start off with the first take on the close. It really felt like a much more defensive stance as we had that sell-off in tech. The weakness that continued from yesterday in session into today's session in financials just sort of added to the concerns here.

Michael Santoli (2:10)

Yeah, retreat from risk across a bunch of different fronts, and it wasn't able to really be offset by some of those defensive kind of bellwethers. A couple of ways I would look at risk appetite waning, the JP Morgan over Citigroup ratio. Week to date, six percentage points, JP Morgan. JP Morgan was up today. Every other bank is pretty much down. Apple, it's like 850 basis points, outperformance versus the semis this week, and even the Dow over the Russell 2000 Russell 2000 looks like it's kind of breaking down below the 200-day moving average. So it's a signal of credit conditions tightening up and can equities handle that. We've been here before. I know you've had these bouts of concern around these areas. It doesn't seem like we're going to give the benefit of that to the AIA hardware food chain. The question is, can the other parts of tech and growth make up the difference?

Melissa Lee (2:59)

Yeah, and you were flagging that reversal in treasury yields in terms of the move we saw on the back of CPI and then sort of the easing off of those levels during the day as a flight to safety. And just to point out, the dollar index had a new high in today's session. It was thought that, for a long time right now, treasuries were not the bid to safety. That's right. Equities were the bid to safety. The dollar was the bid to safety. And so to see that reversal in your day really shows you sort of the concern that may exist now in terms of this equity move that we've seen.

Michael Santoli (3:27)

That's right. In fact, it was late morning between 11 and 12 a.m. Eastern time when the stock market sell off became a little bit more disorderly, higher volume, and all of a sudden it was, oh, rotation's not going to save the tape today. Right. And you did see some buying. Now in fairness to the kind of bond balls, 5.3 on 10s has looked like a pretty good spot to buy for the last couple of weeks since we got in there. So maybe it's just a little bit of that. Also, the CPI number, it moved the Fed odds for October, which is the meeting in two weeks, but it did not say it's definitely going to happen. It's more like a one-third probability.