Wall Street Tumbles as Inflation Fears Derail AI Rally

Wall Street's indexes took a steep dive on Friday, fueled by inflation concerns stemming from Middle East tensions. As the conflict exacerbated economic worries, Treasury yields soared, casting a shadow on the AI-driven rally that had previously lifted stocks to historic heights.

Global bond yields surged too, reflecting economic damage arising from the Iran war, prompting investors to speculate that interest rates might rise sooner than expected. This sentiment was intensified by recent inflation data indicating persistent price pressures, leading to increased bets on a Federal Reserve rate hike in December.

The energy sector was a rare bright spot, buoyed by rising oil prices, while tech stocks faced significant pressure. The U.S.-China summit failed to deliver significant progress on key issues, adding to market uncertainty. Major players such as Microsoft made gains, but overall, declining issues outnumbered advancers on both the NYSE and Nasdaq.

(With inputs from agencies.)