The Australian sharemarket is set to edge higher at the open on Friday, but the local gain comes after a sharp sell-off in Alphabet dragged Wall Street lower, as the company’s report underscored worries about whether its artificial-intelligence investments will pay off. Futures at 4.41am AEDT pointed to a gain of 12 points, or 0.1 per cent, following a 0.5 per cent advance on Thursday.
Alphabet, the company behind Google and YouTube, tumbled 12.9 per cent, heading for its worst day since it began trading more than 20 years ago. The company reported weaker growth than analysts expected and said it had burned through more cash during the latest quarter, according to a measure called free cash flow, after purchases of property and equipment topped US$51 billion ($72.5 billion). The report underscored worries about whether all the huge investments in AI technology will pay off.
The S&P 500 fell 0.5 per cent and was on track for its first loss in four days, while the Nasdaq composite tumbled 1.5 per cent. The Dow Jones Industrial Average was down 0.5 per cent, or 263 points, in mid-afternoon trade. Most other stocks on Wall Street were rising, however, and without Alphabet’s drop the S&P 500 would have been higher for the day.
Several companies rallied after reporting stronger profits for the summer than analysts expected. KLA Corp, whose equipment helps make semiconductors, rose 5.9 per cent; Eli Lilly climbed 5.8 per cent; Mastercard rose 4.2 per cent; and Merck added 4.5 per cent. DoorDash rose 5.3 per cent after saying it agreed to buy Instacart in a deal valuing it at US$17 billion and after reporting stronger profit and revenue. Norwegian Cruise Line Holdings steamed 13.3 per cent higher after also topping expectations for summertime profit and revenue.
In Europe, the European Central Bank held interest rates steady. Its president, Christine Lagarde, said she will resign in February, nine months before the end of her term. European indexes rose.
In the bond market, Treasury yields eased following several mixed reports on the US economy. A preliminary report suggested overall growth may have accelerated more during the summer than economists expected, thanks to spending by consumers and businesses investing in AI. But Americans’ growth in incomes was weaker in September than economists expected, while a measure of inflation worsened. Fewer US workers applied for unemployment benefits last week, which could indicate few layoffs. The yield on the 10-year Treasury fell to 5.00 per cent from 5.05 per cent late Wednesday, having pulled back from 5.30 per cent earlier this month, its highest level since 2002.
Oil prices also helped pull bond yields lower. The price for a barrel of Brent crude sank 0.9 per cent to US$110.67.
In Asian markets, South Korea’s Kospi fell 1.2 per cent due to a drop for market heavyweight Samsung Electronics, which sank 4.1 per cent even though it reported a jump in profit. Other indexes were mixed. The Australian dollar was 0.3 per cent lower at US70.34¢.
Analysis
Why This Matters
- The sell-off in Alphabet, one of the world’s largest companies, signals growing investor scepticism about the profitability of massive AI investment.
- The mixed economic data in the US, stronger growth but weaker income growth and higher inflation, complicates the outlook for interest rates.
- The ECB’s rate hold and Lagarde’s pending resignation add political uncertainty to European monetary policy.
Background
The stock market in 2026 has been underpinned by strong corporate profits and enthusiasm for AI, but rising interest rates and concerns about the cost of building AI infrastructure have introduced volatility. The ASX has been moving in line with global trends.
What to Watch
- Whether Alphabet’s decline triggers a broader reassessment of AI-related stocks.
- The direction of bond yields, with the 10-year Treasury having recently touched its highest level since 2002.
- Christine Lagarde’s departure from the ECB in February, and the implications for the bank’s policy stance.
Checked
12 claims in this story checked against 1 source: 12 supported.
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- SupportedThe ASX was set to edge higher at Friday’s open.Sydney Morning Herald - Latest News: “The Australian sharemarket is set to rise”
- SupportedFutures pointed to an ASX gain of 12 points, or 0.1 per cent, at 4.41am AEDT.Sydney Morning Herald - Latest News: “futures at 4.41am AEDT pointing to a gain of 12 points or 0.1 per cent at the open.”
- SupportedAlphabet’s sell-off weighed on Wall Street amid worries about whether its AI investments would pay off.Sydney Morning Herald - Latest News: “A potentially historic drop for Alphabet’s stock is dragging the US market lower after the company behind Google and YouTube reported weaker growth than analysts expected. The report underscored worries about whether all its huge investments in artificial-intelligence technology will pay off.”
- SupportedThe ASX had advanced 0.5 per cent on Thursday.Sydney Morning Herald - Latest News: “The ASX added 0.5 per cent on Thursday.”
- SupportedAlphabet fell 12.9 per cent and was heading for its worst day since it began trading more than 20 years ago.Sydney Morning Herald - Latest News: “its loss of 12.9 per cent had it heading toward its worst day since it began trading more than 20 years ago.”
- SupportedAlphabet reported weaker growth than analysts expected.Sydney Morning Herald - Latest News: “the company behind Google and YouTube reported weaker growth than analysts expected.”
- SupportedAlphabet said it burned through more cash in the latest quarter, with property and equipment purchases topping US$51 billion ($72.5 billion).Sydney Morning Herald - Latest News: “Alphabet said late Wednesday that it burned through more cash during the latest quarter, according to a measure called free cash flow, after its purchases of property and equipment topped $US51 billion ($72.5 billion).”
- SupportedThe S&P 500 fell 0.5 per cent and the Nasdaq composite fell 1.5 per cent.Sydney Morning Herald - Latest News: “The S&P 500 fell 0.5 per cent and was on track for its first loss in four days, while the Nasdaq composite tumbled 1.5 per cent.”
- SupportedThe ECB held interest rates steady.Sydney Morning Herald - Latest News: “indexes rose in Europe after the European Central Bank held interest rates steady on the continent.”
- SupportedChristine Lagarde said she would resign in February, nine months before her term ended.Sydney Morning Herald - Latest News: “The bank’s president, Christine Lagarde, also said she will resign in February, nine months before the end of her term.”
- SupportedThe 10-year Treasury yield fell to 5.00 per cent from 5.05 per cent late Wednesday.Sydney Morning Herald - Latest News: “the yield on the 10-year Treasury fell to 5.00 per cent from 5.05 per cent late Wednesday.”
- SupportedThe Australian dollar was 0.3 per cent lower at US70.34¢.Sydney Morning Herald - Latest News: “The Australian dollar was 0.3 per cent lower at US70.34¢.”