October 23, 2026

[October 22, 2026] Caution over AI investment and falling interest rates intersect, leading to mixed results for Dow and NASDAQ

Good morning, this is Hal.

In the U.S. stock market yesterday, October 22, 2026, concerns over the massive cost burden and profitability of AI infrastructure investment intensified, leading to widespread profit-taking, particularly in high-tech stocks. As a result, the NASDAQ Composite Index fell sharply by 2.6%.

On the other hand, against the backdrop of surging crude oil prices and geopolitical risks, safe-haven U.S. Treasuries were bought, causing long-term interest rates to fall. This led to capital inflows into defensive stocks and capital goods sectors that reported strong earnings. Consequently, the Dow Jones Industrial Average managed to finish the trading session slightly in positive territory.

Today’s Market Overview

While the NASDAQ was heavily sold off due to a sharp drop in AI-related stocks, the Dow Jones Industrial Average saw a modest gain supported by falling interest rates and strong earnings, showing a divergence between the indices.

S&P 500 Index: 7,663.43 (-93.74 / -1.20%)
Dow Jones Industrial Average: 52,867.98 (+11.89 / +0.02%)
NASDAQ Composite Index: 26,008.86 (-694.00 / -2.60%)

The ‘Three Protagonists’ That Moved the Market

The following three factors drove market sentiment yesterday and influenced the movements of individual sectors.

Resurgence of skepticism toward the AI investment race and the sharp drop in high-tech stocks

Through the earnings reports of major IT companies, the heavy cost burden associated with the AI development race and the uncertainty regarding the recovery of massive investments were highlighted. Compounded by credit concerns for AI infrastructure companies, a fierce sell-off occurred across high-tech stocks.

Rising crude oil prices due to escalating tensions in the Middle East and expectations of additional rate hikes

Crude oil futures prices surged due to supply concerns in the Middle East, with Brent crude briefly reaching the $113 level. Additionally, as the strength of the labor market was confirmed by a drop in new U.S. jobless claims to record lows, expectations strengthened that the Fed would move to raise interest rates further to curb inflation.

Strong earnings from non-tech companies and capital rotation into defensive stocks

While high-tech stocks collapsed, traditional major companies in general consumer goods, defense, and railways reported strong earnings. Capital fled to these defensive value stocks, which consistently earn profits even in a high-interest-rate and inflationary environment, providing support to the market.

Hal’s Perspective: The U.S. 10-year Treasury yield falling below 5% and the polarization of sectors

Today, I will explain the impact of the sharp decline in long-term interest rates and the rotation of capital occurring within the stock market.

Buying of government bonds due to risk aversion and the decline in long-term interest rates: Against the backdrop of political instability in Europe and the sharp drop in AI-related stocks, safe-haven capital flowed into U.S. Treasuries, causing the 10-year U.S. Treasury yield to fall below 5% for the first time in about a month. While lower interest rates are usually favorable for high-tech stocks, this time, concerns over company-specific AI investment burdens outweighed this, causing high-tech stocks to fall.

Concentration of capital in daily necessities and utilities and outflow from high-tech: The decline in long-term interest rates provided a direct tailwind for sectors such as daily necessities, utilities, and real estate, which offer attractive dividends, causing these sectors to rise. A rotation is becoming clear as capital withdrawn from AI infrastructure-related stocks moves into defensive stocks that can be expected to generate reliable profits.

Stocks in focus: Stocks bought for strong earnings or defense-related reasons, and stocks sold due to cost concerns or information leaks

[Gainers]

The stock was heavily bought after reporting strong growth in both third-quarter revenue and profit, and raising its full-year earnings guidance due to expanding defense demand for missiles and space-related products amid rising geopolitical risks.

Although it warned of the impact of rising costs for raw materials and other items, first-quarter revenue and profit exceeded market expectations, and it was chosen as a safe haven as strong consumer demand for daily necessities was confirmed.

The rise in corporate bond yields due to concerns over tech company financing was viewed as an excellent opportunity for the firm, which has massive investment capacity, to earn high returns, attracting capital.

[Losers]

Clinical trial data for its cancer vaccine under development was leaked before the official announcement, and despite the positive results, the stock price plummeted as it was caught in a wave of profit-taking to ‘sell the fact’.

Although third-quarter profit and revenue exceeded expectations, the company recorded its first cash outflow in over a decade due to massive investments in AI infrastructure, and it was met with caution after announcing plans to issue shares for financing.

As concerns over the sustainability of capital expenditure for AI infrastructure and financing spread across tech stocks, it was caught in the sharp decline of the semiconductor stock index, resulting in a significant drop alongside its peers.

Outlook: Focus on PMI flash data and energy and financial earnings

The current U.S. stock market is transitioning from a phase of excessive expectations for AI infrastructure investment to one of selecting companies that are steadily generating profits.

The flash Purchasing Managers’ Index (PMI) will be released at the end of this week, which will confirm the strength of business activity and the presence of inflationary pressure. Additionally, with earnings from energy companies and consumer credit card companies approaching, I believe it is important to maintain a stance of calmly assessing the impact of high oil prices and consumer purchasing power.

That’s all from Hal.

Important Request
This article is intended for informational purposes regarding U.S. stocks and does not recommend the buying or selling of any specific securities. Please make final investment decisions based on your own judgment and responsibility.