Wall Street finished the week lower as AI disruption risk continued to weigh on sentiment, while economic data indicated a slowdown in overall inflation, suggesting little urgency for rate cuts.
For the week, the S&P 500 Index retreated 1.39%, the tech-heavy Nasdaq Composite fell 2.10%, and the blue-chip Dow dropped 1.23%.
However, the financial sector was the worst hit, with State Street Financial Sel Sec SPDR ETF (XLF) emerging as the week’s biggest laggard among all the 11 S&P 500 sectors. XLF dipped 4.81% week-over-week to close at $51.65.
AI disruption fears have cascaded across a number of sectors, from software to wealth management to trucking and logistics, shaping the week into a market-wide debate over who might be at risk of getting automated next.
The fear trade jumped into financials this week. Wealth management (IAI) and tax planning companies sank after private financial software provider Altruist launched an AI solution that creates tax strategies for clients.
From there, insurance brokers (IAK) (KIE) also suffered after the rollout of a new AI tool by private online insurance marketplace Insurify.
Ryan Specialty (RYAN) (-18.54% W/W to $38.71), Arthur J. Gallagher (AJG) (-13.71% W/W to $208.45), and LPL Financial (LPLA) (-13.10% W/W to $334.70) led the week’s largecap losers.
Neptune Insurance (NP) (-19.82% W/W to $18.89), Upstart (UPST) (-19.77% W/W to $30.68), and Baldwin Insurance (BWIN) (-15.69% W/W to $16.50) were the top three midcap losers.
For the smallcap stocks, Strive Asset Management (ASST) (-30.09% W/W to $8.33), TWFG (TWFG) (-29.14% W/W to $18.36) and Goosehead Insurance (GSHD) (-26.42% W/W to $48.69) took the top loser spots.
Meanwhile, big banks including Wells Fargo (WFC) (-7.44% W/W to $86.98), Bank of America (BAC) (-7.04% W/W to $52.55), and JPMorgan Chase (JPM) (-6.16% W/W to $302.55) led the week’s megacap losers.
Notably, all three diversified banks mentioned investing in technology at their respective conference presentations this week.
“We’ll spend 10% more in technology development this year,” said Bank of America CEO Brian Moynihan. “We’ll put several hundred million in AI as part of that.”
“We’re a very different company than we were 5 or 6 years ago,” said Wells Fargo CFO Michael Santomassimo at the UBS Financial Services Conference. “We’ve been investing. We’ve been making sure that we continue to have all the right people, the right technology, the right products that we’ve got to offer.”