Markets:

• Gold down $12 to $4926
• US 10-year yields flat at 4.27%
• WTI crude up $1.07 to $64.28
• S&P 500 down 0.2%, Nasdaq down 1.1%
• USD leads, JPY lags

There was always going to be a reckoning on the AI trade but it wasn’t supposed to happen like this. Claude’s latest features have sparked fears that software companies will lose pricing power and we’ve seen a huge re-rating in their stocks since. That continued today but also boomeranged back into some high-flying chip names like MU, which fell 9% and AMD, which fell 16% after earnings.

Adding to the negative sentiment, bitcoin fell to a fresh low since Nov 2024 at $72,082 and a broad swath of markets was dragged down. Underneath that price action, old economy, industrial and transports were strong once again in a theme that I’ve highlighted all week and is getting increasing attention.

In FX, the US dollar was strong across the board while the yen struggled ahead of this week’s election. It’s the sixth straight day of gains since the rout in the pair on the MoF’s rate check.

In energy markets, oil went on a ride. First it jumped on a report that Iran-US talks scheduled for Friday were called off. Then Iran’s foreign minister said the talks were still on and oil gave much of it back. The stakes are pretty high and some of that spilled over into other markets as well.

In precious metals, a promising early rally was snuffed out. Gold rose as high as $5092 before falling all the way back to $4934 and silver dramatically hit $92.19 only to fall back to $86.85. It was a disappointing turn and highlights how difficult it will be for metals to regain momentum now that profit taking (and likely hedging) are in vogue.