Financial Markets                      02/27 09:30

   

   NEW YORK (AP) -- U.S. stocks are sinking Friday as Wall Street gets back to 
hunting and punishing companies that could be made losers by the 
artificial-intelligence revolution. A surprisingly discouraging update on 
inflation is also hurting the market, while oil prices climb with worries about 
tensions between the United States and Iran.

   The S&P 500 fell 0.7% and is staggering toward the finish of what would be 
just its second losing month in the last 10. The Dow Jones Industrial Average 
was down 680 points, or 1.4%, as of 10:15 a.m. Eastern time, and the Nasdaq 
composite was 0.8% lower.

   The losses came as investors returned to knocking down software companies 
and others whose businesses could end up getting supplanted by AI-powered 
competitors.

   Block, the company behind Cash App, Square and other businesses, gave a 
signal of what AI could do after CEO Jack Dorsey said he was cutting its 
workforce by nearly half. That's even though Block's profit is growing and it's 
sending more cash to shareholders through stock buybacks.

   "Intelligence tools have changed what it means to build and run a company," 
Dorsey said in a letter to shareholders while announcing Block's latest profit 
results. "We're already seeing it internally. A significantly smaller team, 
using the tools we're building, can do more and do it better."

   The co-founder of Twitter also said, "I don't think we're early to this 
realization. I think most companies are late. Within the next year, I believe 
the majority of companies will reach the same conclusion and make similar 
structural changes."

   Block is cutting more than 4,000 jobs from its workforce of over 10,000. Its 
stock jumped 17.5%.

   Capable AI tools that can replace humans could also replace entire 
companies, or at least eat away at their profit margins. Fears about AI 
disruption have been causing sudden and swift sell-offs for stocks seen as 
potentially under threat, rolling through industries as seemingly disparate as 
trucking logistics and legal services.

   Salesforce, whose platform helps customers manage their relationships with 
clients, fell 4%. It gave back its 4% gain from the day before after reporting 
a better profit than analysts expected.

   A widely followed ETF tracking the software industry, meanwhile, sank 2.5% 
to bring its loss for the year so far to 23.8%. The pain has also filtered out 
to the private-equity companies that have lent money to software companies, 
which need to withstand the AI threat to keep repaying their debt. Blue Owl 
Capital fell 4.3%.

   Even the companies currently seeing their revenue and profits soar because 
of AI-related demand are weakening. Nvidia fell 1.7% and was the heaviest 
weight on the U.S. stock market, a day after dropping to its worst loss since 
last spring. That's even though it reported a better profit than analysts 
expected and forecast more in revenue for the current quarter.

   Rival chip companies fell by similar amounts. Worries are hurting such 
companies not only about whether their stock prices rose too high in recent 
years but also whether the huge spending driving their growth can continue.

   Can big spenders like Amazon and Alphabet make back all their billions of 
dollars in AI investments through higher productivity and profits in the future?

   On the winning side of Wall Street was Netflix, which jumped 8.8% after 
walking away from its bid to buy Warner Bros. Discovery's studio and streaming 
business. That put Skydance-owned Paramount in a position to take over its 
Hollywood rival.

   Paramount Skydance shares climbed 7.6%, while Warner Bros. Discovery fell 2%.

   Some of the strongest action in financial markets was for oil, where the 
price for a barrel of benchmark U.S. crude oil rose 2.8% to $67.04. It's the 
latest big swing in the market that's been hit by worries about rising tensions 
between the United States and Iran over Iran's nuclear program.

   The U.S. military has already gathered a massive fleet of aircraft and 
warships in the Middle East, and a conflict could disrupt the global flow of 
oil and drive prices higher.

   Brent crude, the international standard, rose 2.7% to $72.73 per barrel.

   Also hurting the broad market was a report showing that inflation at the 
U.S. wholesale level was at 2.9% last month, much higher than the 1.6% that 
economists expected.

   The number was so much worse than expected that it could help persuade the 
Federal Reserve to hold off longer on its cuts to interest rates. Lower rates 
would give the economy and prices for investments a boost, but they risk 
worsening inflation at the same time.

   In the bond market, the yield on the 10-year Treasury was at 3.98%. It 
swiveled higher following the inflation report, but it's down from its 4.02% 
level late Thursday.

   ln stock markets abroad, indexes were mixed in Europe and Asia. South 
Korea's Kospi fell 1% from its latest record, and Hong Kong's Hang Seng rose 
0.9% in two of the world's larger moves.

   ___

   AP Business Writers Matt Ott and Elaine Kurtenbach contributed.

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