US STOCKS-Wall St extends losses as Meta, Microsoft highlight AI costs

Monolithic Power Systems

31/10/2024 18:49

* 
      Meta Platforms, Microsoft drag megacaps lower
    

        * 
      Estee Lauder on track for worst day on record
    

        * 
      September PCE data in line with estimates 
    

        * 
      Indexes down: Dow 0.65%, S&P 500 1.62%, Nasdaq 2.58%
    

  
 (Updates to midafternoon)
    By Abigail Summerville
       Oct 31 (Reuters) - 
    U.S. stocks slumped on Thursday after Microsoft and Meta
Platforms highlighted growing artificial intelligence costs that
could affect their earnings, curbing enthusiasm for megacap
stocks that have fueled the market rally this year.
    Shares of Facebook-owner Meta Platforms  META.O  dropped
4.5%, while Microsoft  MSFT.O  fell 5.6%, despite both companies
beating earnings estimates in results reported after the bell on
Wednesday.
        Other so-called Magnificent Seven megacap technology
stocks also slipped. Amazon.com  AMZN.O  fell 3.6% and Apple
 AAPL.O  dropped 1.4% ahead of their quarterly results, due
after the market close. Shares of Alphabet  GOOGL.O , which
reported on Tuesday, fell 1.7%.
        "You had three of the Magnificent Seven all say they
basically have open-ended budgets for AI spend and investors
don't like to hear that," said Carol Schleif, chief investment
officer at BMO Family Office.
  
        "The intermediate and longer-term implications of this
buildout are really important for U.S. long-term growth and
long-term productivity. ... In the short run, investors are
asking where's the profit from it?"
  
        Microsoft and Meta both said their 
    capital expenses
     were growing due to AI investments, which could reduce
profitability. 
  
    The benchmark 10-year Treasury note yield  US10YT=RR  also
rose, breaching 4.3%, further pressuring equities.
    The Personal Consumption Expenditures price index, the
Federal Reserve's preferred inflation metric, rose 0.2% in
September, in line with economists' expectations. However, the
core figure was 2.7% year-over-year, slightly above the 2.6%
forecast, while consumer spending increased a little more than
expected.
    After the data, traders stuck to bets for a 25-basis-point
rate reduction in the Fed's November meeting. 
        "We do expect them to cut by a quarter next week because
there is nothing in the data this week that should throw them
off of that," Schleif said.
  
    
        
  
        By 2:15 p.m. ET (0815 GMT), the Dow Jones Industrial
Average  .DJI  fell 275.71 points, or 0.65%, to 41,865.83. The
S&P 500  .SPX  lost 94.37 points, or 1.62%, at 5,719.29 and the
Nasdaq Composite  .IXIC  slid 480.17 points, or 2.58%, to
18,127.76. 
  
        The information technology sector  .SPLRCT  slumped
3.4%, on track for its worst day since early September. Upbeat
results from 
    ConocoPhillips
      COP.N  and 
    Entergy
      ETR.N  lifted energy  .SPNY  and utilities  .SPLRCU .
  
    An index of chip stocks  .SOX  slumped 4.4%, led by a 19%
loss in Monolithic Power Systems  MPWR.O  following its results.
Nvidia  NVDA.O  lost 4.6%.
    The VIX  .VIX , Wall Street's "fear gauge," touched its
highest since early September as investors braced for more
volatility in the next few weeks from corporate results and the
Nov. 5 U.S. presidential election followed by the Fed's
policy-setting meeting.

    
    
    Estee Lauder  EL.N  plummeted 20.5%, on track for its worst
day on record, after the cosmetics company withdrew its 2025
annual forecasts. 
    Shares of Uber Technologies  UBER.N  plunged 11.4% after the
ride-hailing company forecast fourth-quarter gross bookings
below expectations.
        Declining issues outnumbered advancers by a 2.24-to-1
ratio on the NYSE, and by a 2.65-to-1 ratio on the Nasdaq. 
  
        The S&P 500 posted 23 new 52-week highs and eight new
lows while the Nasdaq Composite recorded 51 new highs and 138
new lows.
  

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The Magnificent Seven    https://reut.rs/4fgLCgW
S&P 500 ahead of US presidential elections    https://reut.rs/3NNjZQM
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Abigail Summerville in New York; Editing by
Richard Chang)
 ((Abigail.Summerville@thomsonreuters.com))