Overview
On Thursday, U.S. stocks closed sharply lower as mega-cap tech companies, led by Microsoft and Meta, highlighted the rising costs associated with artificial intelligence, which investors fear could weigh on future profitability. Despite reporting strong earnings, Microsoft and Meta both saw significant declines—down 6% and 4.1%, respectively—following announcements of increasing capital expenditures due to AI investments. Alphabet, which reported earlier in the week, also fell 1.9%. Meanwhile, Amazon and Apple beat expectations, buoyed by Amazon’s cloud services growth and Apple’s strong iPhone sales.
Outside the tech sector, energy stocks saw gains as ConocoPhillips and Entergy posted upbeat results, lifting both the energy and utilities sectors. Rising volatility was reflected in the VIX, Wall Street’s “fear gauge,” as traders braced for more uncertainty surrounding the upcoming U.S. presidential election and the Federal Reserve’s anticipated rate cut next week.
- Dow Jones Industrial Average: Fell 0.90% to 41,763.46
- S&P 500: Lost 1.86% to 5,705.45
- Nasdaq Composite: Dropped 2.76% to 18,095.15
Fear & Greed Index
Fear – Investors are on edge as tech giants announce soaring AI expenses and with the U.S. election and Fed meeting around the corner.
Sector Performance
- Winners:
- Energy and Utilities: Gains in ConocoPhillips and Entergy helped lift both sectors, which were among the few bright spots on a down day.
- Losers:
- Information Technology: Declined heavily, led by Microsoft and Meta, with semiconductor stocks also facing pressure.
- Consumer Discretionary: Estee Lauder dropped 20.9%, posting its worst day on record after withdrawing its 2025 annual forecast.
Key Movers
- Microsoft (MSFT): Fell 6% despite beating earnings, as investors worried about high AI-related expenses.
- Meta Platforms (META): Dropped 4.1% after reporting rising costs tied to AI investments.
- Monolithic Power Systems (MPWR): Plummeted 17.4% after reporting results that missed expectations.
- Estee Lauder (EL): Tumbled 20.9% as the company withdrew its forecast for 2025, disappointing investors.
- Uber (UBER): Declined 9.3% after issuing a fourth-quarter bookings forecast below market expectations.
Economic Data
- Personal Consumption Expenditures (PCE) Index: The PCE, a key inflation gauge for the Federal Reserve, rose 0.2% in September, matching expectations. The core PCE year-over-year figure came in at 2.7%, slightly above the forecasted 2.6%.
- Consumer Spending: Increased slightly more than expected, reinforcing the notion of a resilient economy amid inflation concerns.
Outlook
As the November 5 presidential election approaches and the Federal Reserve prepares for a likely rate cut next week, investors are bracing for more volatility. The mixed performance across sectors, with tech giants facing pressure from AI expenses and energy stocks rising, suggests continued sector-specific shifts. With the PCE inflation reading in line with expectations, markets are anticipating a cautious approach from the Fed, although near-term uncertainty remains high.