GLOBAL MARKETS-Stocks drop as Meta dampens AI optimism; Treasury yields fall

By Caroline Valetkevitch and Amanda Cooper

NEW YORK/LONDON, Oct 22 (Reuters) - Major stock indexes dropped on Thursday as a report from Meta Platforms fanned worries about the AI trade, while US Treasury yields fell sharply and oil prices jumped.

The Nasdaq was down more than 2% and led declines on Wall Street. MSCI's All-World index .MIWD00000PUS was off 1%, and tech shares in Seoul, Tokyo, Amsterdam and Paris fell earlier.

Shares of Meta META.O fell more than 5%. The first of the so-called AI hyperscalers to publish quarterly results, Meta reported third-quarter revenue late on Wednesday that beat expectations, but the company also unveiled a plan to issue non-voting stock that revived concern over its mounting capital commitments.

An index of semiconductors .SOX, among the biggest beneficiaries of AI spending, was down more than 5%.

Shares of Tesla TSLA.O, which also reported earnings and cut its spending forecast, eased 0.8%. Meanwhile, Reuters reported that some Tesla insiders were concerned that CEO Elon Musk's public comments on a potential merger with SpaceX SPCX.O could invite shareholder scrutiny and complicate deal talks. Shares of SpaceX were down 5.6%.

CONCERNS OVER SPENDING

Investor worries about AI spending and how long the AI trade can last have led to sharp swings in indexes. The Nasdaq was up more than 1% on Wednesday following upbeat forecasts.

"To the extent investors believe that those (AI) earnings are real... they are buyers of these stocks," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

"But periodically, when they look at current earnings and the amount they're going to have to spend, they become concerned that these stocks are all overpriced," he said.

The Dow Jones Industrial Average .DJI was down 114.55 points, or 0.22%, at 52,741.54, while the S&P 500 .SPX fell 97.15 points, or 1.25%, to 7,660.02 and the Nasdaq Composite .IXIC fell 590.94 points, or 2.21%, to 26,111.92.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 15.27 points, or 1.34%, to 1,122.61. The pan-European STOXX 600 .STOXX index was off 1.01%.

US Treasury yields dropped, with the yield on the 10-year note falling below 5% for the first time since September 23. Equity declines related to the sustainability of the AI outlook boosted the safe-haven appeal of government debt.

The yield on benchmark US 10-year notes was last down 15.17 basis points at 4.994%, from 5.146% late on Wednesday.

But concerns over France's strained public finances and continuing street protests hit French markets again.

French bond yields climbed, and France's 10-year government bond yields rose above those of equivalent US Treasuries for the first time since 2013, reflecting growing investor concern over France's deteriorating fiscal position and rising debt burden.

France's benchmark 10-year yield was last up 6.5 basis points at 5.06%, after earlier touching 5.1415%, its highest level since July 2002. This week, the yield rose above 5% for the first time since 2002.

Also, the premium investors demand to hold French government debt over safe-haven German Bunds widened to its highest in 15 years.

OIL JUMPS

Geopolitical concerns played out in oil markets. Brent crude climbed to its highest level since May after further Houthi attacks in Saudi Arabia raised fears of an escalation in the Middle East conflict and more disruption to oil supplies from the key exporting region.

US crude was last up 1.22% at $98.35 a barrel and Brent was at $111.25 per barrel, up 2.23% on the day.

The yen was on track for its strongest daily gain in almost a month, as investors sought safety amid fragile equity markets.

The Japanese yen strengthened 0.51% to 157.33 per dollar. The euro was down 0.3% at $1.1198.

In cryptocurrencies, bitcoin fell 3.20% to $81,929.