U.S. 10-year Treasury yield falls to 4.97% as AI stocks sell off
Key Facts
The U.S. 10-year Treasury yield fell to 4.97% on Thursday, October 22, from 5.13% late Wednesday, after topping 5.30% earlier in the month, according to the Associated Press. The agency attributed the decline to investors turning to government bonds as a safer haven as AI stocks fell. The S&P 500 posted its worst session since July, while technology stocks declined broadly. Thomas Urano of Sage Advisory said, in a comment reported by Reuters, "The flight to quality is dominant in the Treasury market." Bond trading remained in step with energy concerns that pushed oil higher, but the Associated Press linked the yield decline to safe-haven demand amid falling stocks.
The S&P 500 lost about 1.2% on Thursday, while the Nasdaq fell 2.6%, according to the Associated Press. The Dow Jones, by contrast, rose less than 0.1% and the Russell 2000 gained 0.1%, reflecting a clear divergence among indexes in the same session. Nvidia was the biggest single drag on the S&P 500 after its shares fell 4.4%. Meta shares also dropped 7% despite quarterly revenue topping analysts' expectations, as earnings fell short of forecasts. The company announced the creation of non-voting Class C shares to fund AI investments and other priorities, and raised the lower end of its annual spending forecast to 135 billion dollars from 130 billion, while keeping the upper end at 145 billion dollars.
Meta's results showed growing pressure on liquidity as spending accelerated: it posted negative free cash flow of 2.12 billion dollars in the third quarter of 2026, compared with positive cash flow of 10.63 billion dollars in the same period a year earlier. Reuters said this was the company's first cash burn in more than a decade. Investors' concern centers on the returns companies will generate from heavy spending on AI infrastructure. Matthew Maley, chief market strategist at Miller Tabak, said, "It's becoming clearer and clearer to people that this is going to take a lot longer." Those concerns put the cost of data centers and chips at the heart of the market's assessment of technology companies' investments.
The sell-off spread to Asia, where South Korea's Kospi fell 3.5%, Hong Kong's Hang Seng dropped 3%, and Japan's Nikkei 225 declined 2.7% on Thursday, according to the Associated Press. The agency said concerns around AI stocks included higher borrowing costs to build data centers and buy more chips, as well as worries that share prices had risen too far. CoreWeave faced similar pressure, with its shares falling 10.1% in the session amid concerns about the company's debt. The company relies on borrowing to buy Nvidia chips and then lease them to customers through cloud computing services. CoreWeave closed an 8.5 billion dollar delayed-draw credit facility on March 31, 2026, and said the financing supports the continued expansion of its AI cloud platform.
EL7 data showed CoreWeave shares closed at 55.6 on October 22, compared with 61.82 the previous day. Reuters also reported that yields on the company's unsecured bonds surged to 15% during the previous week's AI stock sell-off, highlighting the sensitivity of heavily indebted computing companies to tighter financing conditions. A Reuters report said an analyst at Bank of America believes CoreWeave may need to raise 20 billion dollars to fund its customer commitments ahead of its earnings report scheduled for November. That is part of a broader funding wave for computing infrastructure, with the company's ability to service its debt tied to leasing activity and customer commitments. The available facts did not include a new measure of the company's debt in Thursday's session.
In energy markets, Brent crude rose 4% to 113.17 dollars a barrel on Thursday, after touching a five-month high, according to the Associated Press. The agency linked the gains to uncertainty over when the global energy sector would return to normal amid the war with Iran. Meanwhile, the probability of the Federal Reserve raising rates by at least 25 basis points at its October meeting fell to 7.2%, from 27.7% a week earlier and 55.4% a month earlier, according to the CME FedWatch tool as reported by Reuters. Urano said safe-haven demand for Treasuries outweighed energy and inflation concerns over the past week. In Friday's session, October 23, the 10-year yield rose 3.7 basis points to 4.99%, remaining below 5% as concerns persisted about the resilience of AI stocks.
Markets are looking ahead to the Federal Open Market Committee meeting on October 27 and 28, with a press conference scheduled for October 28, according to the Federal Reserve calendar. The Bureau of Economic Analysis is scheduled to release its advance estimate of third-quarter 2026 GDP and September personal income and spending data on October 29 at 8:30 a.m. About one-third of S&P 500 companies will report results the following week, including Alphabet, Microsoft and Amazon. Investors are focused on these AI companies' capital spending forecasts. The results and economic releases follow a session marked by declines in technology stocks, a drop in yields and a rise in oil.