Stocks Plunge as AI Fears Trump Fed Rate Cut

Stocks Dip as AI Anxiety Outweighs Fed Rate Cut The global equity market took a hit on Wednesday, with stocks in Europe and the US experiencing a decline in value, driven by growing concerns over the impact of artificial intelligence (AI) on the economy. This sentiment swing overshadowed the Federal Reserve's decision to cut interest rates, which had been expected to boost market sentiment. The FTSE 100 index in the UK was one of the few exceptions, managing to hold its ground despite the broader market decline. This was largely due to the index's relatively low exposure to the tech sector, which has been a major driver of AI-related anxiety. However, even the FTSE 100 was not immune to the risk-off sentiment that characterized the day's trading, with the index closing 0.2% lower. The decline in stocks was led by cyclical names, including banks, miners, and defence-related firms. Rolls-Royce, a leading manufacturer of defence equipment, was among the biggest losers, with its shares falling by 2.4%. Other notable decliners included HSBC, which lost 1.8%, and Rio Tinto, which fell by 2.1%. The market's shift towards risk-off sentiment was reflected in the performance of various asset classes. Haven assets, such as gilts, precious metals, and currencies like the yen and Swiss franc, outperformed, while tech stocks and other growth-oriented sectors took a hit. The decline in stocks was also reflected in the performance of various indices. The S&P 500 futures contract, which had been trading at around 4,200 earlier in the day, fell to 4,150 by the close. The Dow Jones Industrial Average also declined, closing 0.3% lower. The market's reaction to the AI-related anxiety was a stark reminder of the growing influence of technology on the global economy. As AI continues to advance and automate various industries, investors are becoming increasingly concerned about the potential impact on employment and economic growth. In the short term, the market's focus will remain on the AI-related anxiety, with investors likely to continue to sell shares in companies that are most exposed to the economic cycle. However, in the longer term, the market's reaction to AI will likely be more nuanced, with investors beginning to see the potential benefits of AI-driven innovation and growth. As the market continues to grapple with the implications of AI, investors will be closely watching the performance of various sectors and companies. Those with a high exposure to the economic cycle, such as banks and miners, are likely to remain under pressure, while those with a strong focus on innovation and growth, such as tech stocks, may see a rebound in the coming weeks. In terms of specific numbers, the decline in stocks was led by a 2.4% fall in Rolls-Royce's shares, followed by a 2.1% decline in Rio Tinto's shares. The FTSE 100 index closed 0.2% lower, while the S&P 500 futures contract fell to 4,150 by the close. The Dow Jones Industrial Average also declined, closing 0.3% lower.