S&P 500, Nasdaq Drop as Meta, Microsoft Decline Over AI Costs

The recent market activity indicates a notable drop in the S&P 500 and Nasdaq, largely driven by concerns over artificial intelligence (AI) expenditures from major tech firms. Both Meta and Microsoft reported disappointing figures that raised alarms among investors.

S&P 500 and Nasdaq Performance

On October 30, both the S&P 500 and Nasdaq Composite experienced significant declines. The S&P 500 fell by 0.47%, closing at 6,858.38, while the Nasdaq Composite dropped 0.98%, finishing the day at 23,724.66. The Dow Jones Industrial Average managed to gain 0.24%, ending at 47,745.45.

Impact of Meta and Microsoft’s Spending on AI

Meta Platforms saw its stock value plunge approximately 11%, marking its most significant drop in three years. The decline resulted from the company’s forecast of “notably larger” capital expenditures next year tied to its AI investments. Microsoft also faced challenges, with shares down 3% after disclosing a record capital expenditure of around $35 billion for its fiscal first quarter.

Federal Reserve’s Tone Influences Market Sentiment

The S&P 500 and Nasdaq’s downturn coincided with remarks from Federal Reserve Chair Jerome Powell. He emphasized that another rate cut in December was not certain, diminishing earlier expectations that stood at over 90% probability for a cut. As a result, traders adjusted their outlook significantly, now estimating a 70% chance for a rate cut.

Market Dynamics and Earnings Reports

Despite the downturn, the reporting season for the third quarter has shown resilience. Of the 222 S&P 500 companies that have reported, 84.2% exceeded earnings estimates, surpassing the average rate of 77% in previous quarters. Investor sentiment appears to be affected by a mix of rising dollar values and Treasury yields.

Stock Highlights and Other Movers

• Alphabet (GOOGL) rose 3% due to strong results from its advertising and cloud services.
• Cardinal Health (CAH) increased by 13% after raising its annual profit forecast.
• Chipotle Mexican Grill (CMG) fell 17% after reducing its sales outlook.

Overall, the response from traders indicates a cautious approach amidst fluctuating market conditions. As the major tech firms continue to influence market metrics, all eyes will remain on upcoming earnings reports that may further alter the investing landscape.