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Let’s start with stocks. The S&P 500 fell 0.3% yesterday, its first drop in four days, as Alphabet’s stock had its worst day on record. The Nasdaq lost 1.4% and the Dow slipped 0.3%. Most stocks rose, and without Alphabet the S&P 500 would have finished higher. Treasury yields fell too, and the 10-year yield dipped below 5%.
Wall Street’s worries about whether AI spending will pay off came back yesterday. Alphabet’s free cash flow came in at negative $9.07 billion last quarter, while analysts had expected a shortfall of about $2.7 billion. Free cash flow is the cash left after running the business and paying for new equipment. The company has been pouring money into data centers to compete in AI.
The Fed held interest rates steady on Wednesday, but two of its 12 voting members wanted to raise them again. Cleveland Fed President Beth Hammack and Governor Lisa Cook pushed for another quarter-point hike after September’s increase, the central bank’s first since 2023. Chair Kevin Warsh said inflation has run above the Fed’s 2% goal for close to six years. After the decision, traders saw about an 83% chance of a hike at the Dec. 8-9 meeting.
What to watch today: The Chicago Business Barometer comes out at 9:45 a.m. ET. Economists expect the monthly survey of Midwest businesses to slip to about 55 from 58.8 in September, though any reading above 50 means business is still growing. San Francisco Fed President Mary Daly speaks at noon ET. It’s also the last trading day of October.
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