Suddenly, Wall Street is worried that the U.S. economy is more ‘vulnerable’ than it looks

Key Points:

• The NFIB small business index dropped to 97.9 in September from 98.7 in August, reflecting a loss of momentum in business activity, partly due to rising global energy prices; however, the survey's response rate has significantly declined over the years.
• Labor market growth outside healthcare is stagnant, with monthly payroll increases averaging around 40,000 and essentially zero excluding healthcare, amid concerns about low labor force participation driven by retirements and low immigration.
• Rising interest rates pose risks to AI capital expenditure, as higher borrowing costs and falling valuations may hinder investment, potentially making AI a vulnerable sector if rates stay elevated for an extended period.
• Inflation accelerated to 3.7% in September, surpassing expectations and fueling speculation that the Federal Reserve may raise interest rates again, with experts warning that geopolitical conflicts are sustaining inflationary pressures.
• A global sell-off in tech stocks occurred despite some positive sector news, including strong earnings from TSMC and record highs for Apple; bond markets also showed volatility, with 10-year U.S. Treasury yields swinging significantly amid investor uncertainty.