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Stocks dropped on Thursday as investors began to worry about the negative side of the artificial intelligence buildout, which threatens to disrupt the business models of whole industries and raise unemployment.
The Dow Jones Industrial Average cratered 669.28 points, or 1.3%, to 49,452.12, led lower by Cisco Systems, which slid 12% after the maker of networking hardware such as switches and routers issued disappointing guidance for the current quarter.
The S&P 500 index went south 108.72 points, or 1.6%, to 6,832.72.
The NASDAQ dropped 469.32 points, or 2%, to 22,597.15.
Financial stocks such as Morgan Stanley came under pressure on fears that AI would disrupt wealth management businesses, while shares of trucking and logistics companies such as C.H. Robinson plummeted 14% on fears that AI would streamline freight operations, thereby weighing on certain revenue lines.
AI disruption fears even spread to the real estate sector, hurting stocks like CBRE and SL Green Realty, on the notion higher unemployment will hit demand for office space.
Software stocks — a group that has been plagued by disruption worries in recent weeks — extended their year-to-date losses during the trading day. Shares of Autodesk dropped 4%, and its year-to-date slide is now 24%.
Those moves come after a downbeat trading day on Wall Street. Stocks ended the session lower after earlier rallying off the back of a strong jobs report, which showed sharp jobs growth of 130,000 last month, far above what economists were expecting, and much higher than the downwardly revised December gain. The unemployment rate ticked lower to 4.3% from 4.4%.
The report was a relief for investors who worried it would show a drop-off in the labor market, following a raft of recent data that’s indicated slowing growth in a “no hire, no fire” environment.
Yet the strong payrolls numbers also muddy the Federal Reserve’s interest rate outlook and could mean fewer rate cuts than traders were hoping for if higher inflation also remains an issue.
That underscores the importance of Friday’s consumer price index, which could show the central bank just what is needed for its dual mandate to come into better balance.
Prices for the 10-year Treasury gained, lowering yields to 4.10% from Wednesday’s 4.17%. Treasury prices and yields move in opposite directions.
Oil prices slid $1.78 to $62.85 U.S. a barrel.
Gold prices tumbled $165.10 to $4,933.40 U.S. an ounce.
