AI doubts hurt hedge funds too as oil climbs back above $100

It's the weekend, and last night's session didn't bring much comfort. The shock of Thursday's 2.6% Nasdaq drop faded a bit, but the Dow opened nearly 500 points lower on Friday, and inflation and AI worries together pushed a volatile week to a lower finish. People in the industry have started calling this month «Black October».

What stands out is the damage to Wall Street's big players. Goldman Sachs data show global hedge funds had their broadest one-day loss since the pandemic on Thursday, and they are aggressively shorting U.S. stocks to win it back. A leveraged semiconductor ETF took in record money last week and then lost heavily. Focus has shifted from how much AI earns to how AI infrastructure gets financed.

Still, the market didn't move in just one direction. Even on Thursday's tech rout, more than 300 S&P 500 stocks rose, and the equal-weight index is up 4.1% in October. A so-called recession trade, with defensives such as consumer staples leading, showed up for the first time in a long while.

Oil climbed back above $100. Iran said it is ready for war, and talk spread that the U.S. and Israel could strike Iran again after the midterm elections. October saw a record number of ship attacks in the Strait of Hormuz. Michigan consumer sentiment slipped to 48, a five-month low, and French government bond yields hit their highest since the euro-zone debt crisis.