If you were hoping for a calm Friday to end a choppy week on Wall Street, well, you didn't get it. Instead, investors got a sharp reminder that two of their biggest worries—artificial intelligence and inflation—can team up to cause a real mess, especially for the financial sector.

By early afternoon in New York, the mood was decidedly red. The Dow Jones Industrial Average was down 1.3%, the S&P 500 fell 0.7%, and the small-cap-focused Russell 2000 took the hardest hit, tumbling 2.1%. But the real story was in the financials aisle.

The big banks got hammered. Goldman Sachs (GS), Wells Fargo (WFC), Bank of America (BAC), Morgan Stanley (MS), and Citigroup (C) all plunged between 5% and 7%. For most, it was their worst single-day performance since early April. The pain spread to other financial players too; Jefferies Financial Group (JEF) and Western Alliance Bancorp (WAL) sank around 11%.

So, what's spooking everyone? It seems to be a cocktail of AI anxiety and stubborn economic data. There's a growing narrative that artificial intelligence could fundamentally disrupt large swaths of the banking and financial services industry, from loan underwriting to asset management. It's the kind of long-term, existential fear that can make investors suddenly question the value of today's profitable businesses.

Adding fuel to the fire was the morning's economic data. The Producer Price Index (PPI) came in hotter than economists expected. For the Federal Reserve, which is looking for clear signs that inflation is cooling before it starts cutting interest rates, this was unwelcome news. Higher rates for longer are generally a headwind for financial stocks, as they can pressure net interest margins and slow down economic activity.

The investor anxiety didn't stop at the banks. It seeped into the world of private equity, where firms like Blackstone Inc. (BX) (down 4.58%), Blue Owl Capital (OWL) (down 6.06%), and Ares Management (ARES) (down 7.64%) traded sharply lower. The fear here appears to be about potential impairments—if the economic outlook darkens and financing remains tight, the value of the assets these firms hold in their massive portfolios could take a hit.

Even the tech sector, often a bastion of optimism, couldn't escape the gloom. Nvidia Corp. (NVDA), the poster child for the AI boom, fell another 2.8%. That extended a 5.4% drop from Thursday, putting it on track for its worst two-day stretch since April. It's a sign that the very technology causing anxiety elsewhere is also seeing its high-flying champions come back to earth, at least temporarily.

But it wasn't a sea of red everywhere. A few lifeboats managed to stay afloat, and some even sailed higher. Netflix (NFLX) was a standout, rallying 11%. The streaming giant's stock jumped after it reportedly walked away from a bidding war for Warner Bros. Discovery (WBD). Investors seemed to applaud the financial discipline, rewarding the company for not overpaying in a costly acquisition battle.

In other deal news, shares of Paramount Skydance Corp. (PSKY) soared 23% after it secured a massive $110 billion takeover of Warner Bros. Discovery. Block, Inc. (XYZ) also gained nearly 15% after announcing significant layoffs across its Square, Cash App, and Afterpay units, a move markets often interpret as a focus on profitability.

Over in crypto, the risk-off sentiment continued. Bitcoin fell 2.6% to around $65,000, staring down its sixth consecutive weekly loss. Meanwhile, traditional commodities found some bids. Oil rose over 2% to above $66 a barrel, gold gained 1%, and silver put in a particularly strong rally of 6%.

Here’s a snapshot of how the major indices and some key ETFs were faring around 1:00 p.m. ET:

Among exchange-traded funds, the story was similar: the Vanguard S&P 500 ETF (VOO) fell 0.7%, the SPDR Dow Jones Industrial Average ETF (DIA) fell 1.3%, and the iShares Russell 2000 ETF (IWM) dropped 2.1%. Sector-wise, the Technology Select Sector SPDR Fund (XLK) underperformed, down 1.6%, while the Energy Select Sector SPDR Fund (XLE) managed a 1.2% gain.

For a clearer picture of the day's extreme moves, here are the biggest winners and losers in the Russell 1000 index:

Top 5 Gainers:

Top 5 Losers:

All in all, it was a fittingly volatile end to a week where the future of finance seemed to collide with the stubborn realities of the present economy. Investors headed into the weekend weighing whether Friday's selloff was a healthy correction or the start of something more concerning.