US stocks sink and oil prices rise as worries about AI, inflation and possible war hit Wall Street

U.S. stocks retreated Friday as Wall Street continued its harsh treatment of companies perceived as potential casualties in the artificial intelligence revolution, capping a rare losing month for the market. A disappointing inflation report and escalating U.S.-Iran tensions further pressured equities.

The S&P 500 fell 0.4% to 6,878.88, marking just its second monthly decline in the past 10 months. The Dow Jones Industrial Average dropped 521.28 points, or 1.1%, to 48,977.92, while the Nasdaq composite sank 0.9% to 22,668.21.

Investors maintained their focus on businesses they suspect might be rendered obsolete by AI-powered competitors, with software companies bearing much of the selling pressure.

Block, the company behind Cash App and Square, offered what many viewed as a sobering preview of AI’s potential impact on the workforce. The company announced it would cut its staff by nearly half despite reporting a strong year. Block’s stock surged 16.8% on the news.

“Intelligence tools have changed what it means to build and run a company,” Block Chair Jack Dorsey wrote in a letter to investors. “We’re already seeing it internally. A significantly smaller team, using the tools we’re building, can do more and do it better.”

Dorsey’s assessment sent ripples through the market as he predicted widespread adoption of similar strategies. “I don’t think we’re early to this realization. I think most companies are late. Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes,” he stated.

The AI-driven sell-off has affected companies across diverse sectors, from trucking logistics to legal services, as investors reassess which businesses might face disruption. Salesforce dropped 2.3% despite reporting better-than-expected profits the previous day.

Private equity firms with exposure to software companies also took hits. Apollo Global Management plummeted 8.6%, making it one of the S&P 500’s worst performers, while Blue Owl Capital, which has significant loans to software businesses, fell 6%.

Even AI beneficiaries faced pressure. Market heavyweight Nvidia declined 4.2%, continuing its slide from the previous session despite beating profit expectations. Investors are increasingly questioning whether companies like Amazon and Alphabet can recoup their massive AI investments through productivity gains and future profits.

In a bright spot, Netflix shares jumped 13.8% after abandoning its bid to acquire Warner Bros. Discovery’s studio and streaming business. This development positions Skydance-owned Paramount to potentially take over its Hollywood rival. Paramount shares soared 20.8%, while Warner Bros. Discovery fell 2.2%.

Oil prices saw significant movement, with U.S. benchmark crude rising 2.8% to $67.02 per barrel amid escalating tensions between the United States and Iran over the latter’s nuclear program. The U.S. military has assembled a substantial fleet of aircraft and warships in the Middle East, raising concerns that a potential conflict could disrupt global oil supplies. Brent crude, the international standard, climbed 2.4% to $72.48 per barrel.

Adding to market pressures, a government report showed wholesale inflation at 2.9% last month, significantly higher than the 1.6% economists had predicted. This unexpected jump could force the Federal Reserve to delay interest rate cuts, which would otherwise boost the economy and investment prices but risk exacerbating inflation.

In the bond market, the yield on the 10-year Treasury fell to 3.96% from 4.02% late Thursday, reflecting investor nervousness and movement toward traditionally safer assets.

Global markets delivered mixed results, with South Korea’s Kospi falling 1% from its recent record high, while Hong Kong’s Hang Seng rose 0.9%.

As the market digests these developments, investors are reassessing their positions in light of AI’s transformative potential, geopolitical tensions, and a more persistent inflationary environment than previously anticipated.