Meta's AI Spending Sank Stocks And Pushed Yields Below 5%

Meta told investors it expects to spend $135 billion to $145 billion building out artificial intelligence this year, and the market took that as a warning rather than a boast. Technology shares had their worst day since June on Thursday while money poured into US government bonds, pushing the ten-year Treasury yield back below 5% in its biggest one-day fall since 2023. Overseas, France's borrowing cost hit a 24-year high with a credit rating review hours away, and the International Energy Agency warned that Europe faces winter with the emptiest gas storage on record.

Fast Facts

• Weekly filings for unemployment benefits fell to 194,000 in the week through October 17, from a revised 200,000 the week before, the Labor Department said (Read More)
• Sixteen years is how long a median-income renter household now needs to save a down payment and closing costs on a starter home, twice as long as in 2019, and 21 years for a median-income Black renter household, according to a Center for Responsible Lending analysis (Read More)
• Airfares were 22% higher in September than a year earlier, a tenth straight monthly increase that pushed the government's airfare index to an all-time high as jet fuel costs climbed (Read More)
• Sallie Mae cut its full-year guidance to $1.95 to $2.05 of earnings per share from $3.10 to $3.20, after writing off more private student loans as uncollectable (Read More)
• Nippon's U.S. Steel will spend nearly $3 billion on a hot strip mill near Pittsburgh, lifting the plant's annual capacity to about 3.5 million tons from 2.2 million (Read More)
• OpenAI is in talks to raise up to $30 billion at a $1.25 trillion valuation before the new money arrives, CNBC reported, a private round rather than the public listing it filed confidential paperwork for in June; the company declined to comment (Read More)

Global News

• Volvo Car said it would cut another 2,500 jobs, about 6% of its workforce, as car-market conditions worsen, and the shares fell 26% (Read More)
• A 2.14% drop on Friday leaves South Korea's Kospi index 41% below the record it set in June, as the enthusiasm for artificial intelligence that drove it there has drained away (Read More)
• Chinese stocks rebounded on Friday a day after a selloff pushed the benchmark index into a bear market, with heavy exchange-traded-fund trading pointing to possible state buying, the South China Morning Post reported (Read More)
• Shares in Kering fell 12% after group sales declined on a 6% drop at Gucci, the French group's biggest brand at close to half of revenue (Read More)

Meta's 2026 Spending Plan Pushed Stocks Down And Bond Prices Up On The Same Day

Meta raised its projected 2026 capital spending, now $135 billion to $145 billion, alongside its third-quarter results. That figure is guidance, not a receipt: what Meta expects to spend on data centers, chips and the other equipment behind artificial intelligence over a year that is not yet finished. Shareholders did not read it as good news. Meta fell nearly 7% on Thursday, October 22, and the selling hit hardest at the companies that sell that equipment. Intel and AMD each dropped about 8% and Nvidia fell 4.4%. The Nasdaq Composite, which is weighted toward technology companies, closed down 2.6%, about 5.8% below the record high it set on October 6. The S&P 500, which leans less on tech, fell 1.2%. Apple rose 1.2%.

Money that leaves one market usually arrives in another, and a lot of it arrived in US government bonds. The Treasury's own daily par yield curve put the ten-year note at 4.96% as of the close on Thursday, October 22, down 17 hundredths of a percentage point, what traders call 17 basis points. The two-year yield closed at 4.65% and the thirty-year at 5.29%. Treasury publishes that curve around 3:30pm ET, so every yield here is a Thursday close.

A bond's price and its yield move in opposite directions, for a simple arithmetic reason: the interest payments a bond makes are fixed when it is issued, so pay more for that same stream and the percentage you earn gets smaller. When buyers crowd into Treasuries they bid prices up, and the yield comes down. Why crowd in at all? A government bond pays a known amount on a known date; a company's profits years from now are an estimate. On Thursday, investors felt less sure about one estimate in particular: what this much AI spending eventually earns back. This was not purely a rush for safety: the two-year yield, which tracks where investors think the Federal Reserve is heading with short-term interest rates, fell 16 hundredths against the thirty-year's 13. The ten-year yield is also what long-term borrowing costs, mortgages included, get priced off.

Not everyone reads the week as a verdict on AI. Jay Goldberg, senior analyst at Seaport Research Partners, pointed at sentiment rather than fundamentals: "Investors have just decided to be afraid this week." By Friday, October 23, the Wall Street Journal reported tech stocks steadying. Investors are not really arguing about whether demand for AI exists; they are arguing about whether spending this much, this fast, pays off, and over what timeline.

Sources: Al Jazeera · WSJ · U.S. Treasury · our October 20 briefing

France's Borrowing Cost Hit A 24-Year High With A Rating Review Hours Away

France's ten-year borrowing cost, the interest rate the French government promises lenders on new ten-year debt, topped 5% again in early Paris trading on Thursday, October 22, a 24-year high. It first broke that level on October 21, and reporting ties the move to a deadlock over the 2027 budget and the aftermath of riots the previous weekend. France now pays roughly 1.57 percentage points more than Germany for the same ten-year money, and that gap is the standard way investors price one government's finances against another's. The new piece is the calendar: Moody's, a credit rating agency, is scheduled to update its rating on French debt after US markets close on Friday, October 23. France sits at Aa3 with a negative outlook, meaning the agency has already flagged a possible downgrade, and the result is not known as this publishes.

A rate on government debt is a line in the budget: when the rate on new borrowing rises, a bigger slice of the taxes a government collects goes to paying interest, and less goes to everything else. That is exactly what a budget deadlock is a fight over. A credit rating works like a credit score on a student's first bank account: an opinion on how likely a borrower is to pay back on time, and a weaker opinion means lenders ask a higher rate. The strain showed up elsewhere in prices this week: borrowing costs rose in Italy and Belgium, the yen hit a one-year high against the euro as investors looked for somewhere steadier, and Japan's ten-year government bond yield fell to a two-month low on Friday, October 23. Bond prices and yields move in opposite directions, so that falling Japanese yield is the visible footprint of money arriving.

Analysts quoted in the coverage still consider this a long way from another euro-zone crisis: a real problem for the French budget, but not a market emergency. For comparison, the US ten-year Treasury yield closed at 4.96% on October 22, so France was paying more than the United States for identical ten-year money.

Sources: SCMP · MarketWatch · Economic Times · U.S. Treasury · our October 22 briefing

Europe Heads Into Winter With The Emptiest Gas Storage On Record

Europe has less gas banked going into this winter than it has ever had at this point in the year. Fatih Birol, executive director of the International Energy Agency, told Al Jazeera in Berlin on October 23 that the continent cannot absorb another supply shock. "Life will not be easy for Europe this year and also next year," he said. EU storage sites are roughly 72% full against a normal pre-winter level of about 90%, a shortfall analysts size at the energy to power 10 to 12 million homes. European gas prices have climbed about 140% since February to their highest level since late 2022, pushed up by fears that renewed escalation between the United States and Iran would interrupt shipments of liquefied natural gas, which is gas chilled into a liquid so it can travel by ship.

Gas is not only a heating bill; it is an input into making almost everything else, from fertilizer to glass to the electricity in the wall. So a gas price does not stay in the energy aisle; it turns up in household bills and in what it costs companies to make things, and that is already showing in the data. The European Commission's flash consumer confidence indicator for the euro area, a survey score in which a negative reading means more pessimists than optimists, fell 1.1 points to minus 17.9 in October, below the minus 17.0 economists had expected. Storage is a buffer, and the awkward thing about a buffer is that you only find out how big it needed to be afterward.

Sources: Al Jazeera · WSJ on European gas prices · WSJ on eurozone consumer sentiment

What To Watch

Every company figure below is analysts' average forecast for earnings per share, not a result.

Reporting today:

• American Express (AXP), before the open: $4.47 expected against $4.14 a year ago, and a read on whether households are still spending on travel and dining.
• Thirty companies are expected in all, including the Italian energy group Eni at $1.92 against $0.90 a year ago and the oilfield-services company SLB at $0.62 against $0.69.

Later today and this weekend:

• Moody's is scheduled to update its rating on French government debt after U.S. markets close, and nothing has been decided.

Next week:

• Verizon (VZ) is expected Monday before the open at $1.27 against $1.21, one of seventy-six companies on Monday's calendar.
• Tuesday brings 178 companies, including Coca-Cola (KO) before the open at $0.87 against $0.82 and Boeing (BA), forecast to lose $0.21 a share against a loss of $7.47 a year earlier.
• The Federal Reserve's rate-setting committee meets on October 27 and 28, with a press conference expected on the 28th, and any decision lands after this post publishes.
• The Bureau of Economic Analysis publishes Gross Domestic Product and Personal Income and Outlays on Thursday, October 29.
• Two numbers to watch: whether the ten-year Treasury yield stays below 5% after Thursday's move, and whether European gas storage keeps falling as the heating season starts.

The Classroom Takeaway

Thursday showed both halves of a market moving at once: share prices fell while government bond prices rose, which pushed yields down. Students can set rates themselves in Run the Fed.