Stock market today: Nasdaq leads sell-off after Microsoft, Meta earnings prompt Big Tech slide
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The Nasdaq led a tumble in US stocks on Thursday after Meta (META) and Microsoft (MSFT) earnings sparked worries about prospects for Big Techs amid rising artificial intelligence costs.
The tech-heavy Nasdaq Composite (^IXIC) sank 2.7%, while the S&P 500 (^GSPC) fell nearly 1.9%, as both indexes ended the month slightly in the red. The Dow Jones Industrial Average (^DJI) also notched a monthly loss after dropping 0.9% on Thursday.
The monthly declines snapped five straight months of gains for the S&P 500 and Dow.
Optimism for a Big Tech boost to stocks took a knock as investors digested Meta's and Microsoft's quarterly reports. While the results beat Wall Street estimates, both companies flagged that they will step up already high spending on AI infrastructure.
Concerns that would put pressure on profitability helped send shares in both Meta and Microsoft lower.
The unsettled mood spread to Amazon (AMZN) and Apple (AAPL), which rounded off this week's "Magnificent Seven" earnings with reports after the close on Thursday. AI darling Nvidia (NVDA) also fell over 4.5%.
After the bell, the mood around Amazon improved, as its stock popped after the tech giant topped Wall Street's estimates for both revenue and earnings per share. Meanwhile, Apple shares slid slightly as a one-time charge related to the reversal of a European General Court decision weighed on the company's earnings per share.
On the macroeconomic front, investors received the latest reading on the Personal Consumption Expenditures index, which largely matched expectations. The reading is the last key inflation input for the Federal Reserve before its policy decision next week.
Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards
In jobs-related data, initial jobless claims declined to a five-month low of 216,000, lower than estimates. Next up is the all-important jobs report on Friday.
LIVE COVERAGE IS OVER 18 updatesApple reports better-than-anticipated Q4 revenue, but earnings per share hurt by EU charge
Yahoo Finance's Dan Howley reports:
Apple (AAPL) announced its fourth quarter earnings on Thursday, giving Wall Street its first look at whether the company’s Apple Intelligence platform is juicing iPhone sales.
For the quarter, Apple saw earnings per share (EPS) of $0.97 on revenue of $94.9 billion. The company says it saw a one-time charge related to the reversal of a European General Court decision that requires Apple to pay 13 billion euros to Ireland for back taxes.
Without the charge, EPS would have come in at $1.64. That would have blown past expectations of $1.59 per share and revenue of $94.3 billion.
The company reported EPS of $1.46 on revenue of $89.4 billion during the same period last year.
Intel stock jumps on positive outlook despite Q3 losses
Yahoo Finance's Dan Howley reports:
Intel (INTC) reported its Q3 earnings after the bell on Thursday beating expectations on revenue, but falling short on earnings per share due to impairment charges. But positive Q4 guidance and a beat on data center revenue helped send the stock higher by as much as 12% following the report.
For the quarter, Intel saw a loss per share of $0.46 on revenue of $13.28 billion. Analysts were anticipating a loss per share of $0.03 on revenue of $13 billion. That’s down from the earnings of $0.41 per share and revenue of $14.1 billion the company saw in the same quarter last year.
Amazon stock pops after Q3 earnings beat
Amazon (AMZN) stock popped as much as 5% after the company reported stronger revenue and earnings per share for the third quarter than Wall Street expected.
The company also said it expects revenue in a range of $181.5 billion to $188.5 billion in the fourth quarter. Analysts had forecasted $186.36 billion in revenue for the quarter. Meanwhile, Amazon said Operating income is expected to be between $16.0 billion and $20.0 billion during the fourth quarter. Wall treet had projected $17.49 billion.
Big Tech leads losses as Nasdaq drops 2.7%
Big Tech led Thursday's losses, with all three averages ending lower.
The tech-heavy Nasdaq Composite (^IXIC) sank 2.7%, while the S&P 500 (^GSPC) fell nearly 1.9%. The Dow Jones Industrial Average (^DJI) notched a monthly loss, dropping 0.9%. All three averages closed out October slightly in the red.
Meta (META) and Microsoft (MSFT) earnings sparked worries about prospects for Big Tech amid rising artificial intelligence costs, with those stocks losing more than 4% and 6%, respectively. All of the 'Magnificent Seven' stocks fell, with Al chip heavyweight Nvidia (NVDA) dropping more than 4.5%.
Numbers to know for Big Tech earnings
A slew of tech earnings are set to hit the tape again after the bell.
Below is what Wall Street is expecting:
Amazon: Amazon is expected to report earnings per share of $1.16 on revenue of $157.29 billion. Read the full preview.
Apple: For the quarter, Wall Street expects Apple to report earnings per share (EPS) of $1.59 on revenue of $94.3 billion, according to Bloomberg consensus estimates. Read the full preview.
Intel: For the quarter, Intel is expected to report a loss per share of $0.03 on revenue of $13 billion. That’s down from the earnings of $0.41 per share and revenue of $14.1 billion the company saw in the same quarter last year. Read the full preview.
Big Tech's spending ramps up
Both Microsoft (MSFT) and Meta (META) topped Wall Street's estimates for revenue and earnings per share. But both also talked about ramping up spending on artificial intelligence, which appeared to weigh on sentiment as each stock slumped about 5% on Thursday.
Microsoft's capital expenditures picked up to $20 billion in the most recent quarter from $19 billion the quarter prior. CFO Amy Hood said the company is ramping up investments in response to "AI demands." The company did, however, note that the extra spend is weighing on Microsoft's margins.
For its part, Meta raised the lower end of its guidance range for full-year capital expenditures from $37 billion to $38 billion, and CFO Susan Li made a rather ambiguous statement about spending plans moving forward, saying the company expects "significant capital expenditure growth in 2025."
The chart below shows a clear trend in growing capital expenditures. The companies say it's going to drive future revenues. For now, the market appears not to love it. But whether it will work in the long run remains a looming question that doesn't have a clear answer.
RBC Capital analyst Rishi Jaluria wrote about Microsoft on Thursday, “While investors may be hung up on the optics of decelerating Azure growth paired with substantial CapEx, we see a path to upward revisions, and would be a buyer on weakness."
October jobs report expected to show slowing growth amid hurricane aftermath, Boeing strike
The October jobs report is expected to show job gains slowed significantly during the month as recent hurricanes and a strike by Boeing workers weigh on the labor market.
The monthly report from the Bureau of Labor Statistics, slated for release at 8:30 a.m. ET on Friday, is expected to show nonfarm payrolls rose by 105,000 in October while the unemployment rate held flat at 4.1%, according to consensus estimates compiled by Bloomberg. This would mark the lowest monthly number of job additions since December 2020.
In September, the US economy shocked Wall Street by adding 254,000 jobs, well above consensus estimates. The unemployment rate declined to 4.1%.
Here are the key numbers Wall Street will be looking at on Friday morning compared to the previous month, according to data from Bloomberg:
Mortgage rates rise for fifth straight week amid pre-election volatility
Yahoo Finance's Claire Boston reports:
Mortgage rates rose for a fifth straight week as pre-election volatility continued to rock the bond market.
The average 30-year fixed-rate mortgage was 6.72% in the week through Wednesday, according to Freddie Mac data, up from 6.54% a week earlier.
15-year mortgage rates also increased to 5.99% from 5.71% a week ago.
Read more here.
Big Tech leads declines, Nvidia falls 4%
Technology stocks led the overall market declines on Thursday. The S&P 500 Technology Sector (XLK) ETF slid 2.8% by mid-session.
AI chip heavyweight Nvidia (NVDA) was down more than 4% along with other semiconductor stocks.
Among Big Tech's declinersoftware giant Microsoft (MSFT) fell more than 5% following its quarterly results. Social media company Meta (META) fell roughly 4% after indicating it will step up spending on AI infrastructure next year.
Amazon (AMZN), set to report earnings after the bell, also dropped more than 3%.
DJT stock extends double-digit plunge after worst day yet for Donald Trump's company
Trump Media & Technology Group stock (DJT) extended its double-digit declines on Thursday as the stock reversed sizable gains from earlier in the week. Shares fell around 15% and trading was briefly halted due to volatility.
As Yahoo Finance's Alexandra Canal reports, the massive swings come as the stock suffered its largest percent decline on Wednesday after shares plunged around 22%.
Since Tuesday, more than $3 billion has been shaved from the company's market cap, although the stock is still up roughly 130% from its September lows.
Read more here.
Super Micro drops another 14% as accounting questions weigh on AI highflier
Super Micro Computer (SMCI) stock dropped nearly 14%, extending declines of 33% in the prior session to erase all of its year-to-date gains, as some Wall Street analysts backed away from covering the stock after accounting firm Ernst & Young resigned during the company's audit.
On Thursday, Argus downgraded the server maker to Hold from Buy, with no price target. Meanwhile analysts at Needham and Wells Fargo suspended coverage of the company.
Comcast considers spinning off cable networks 'to play some offense' amid industry turmoil
Yahoo Finance's Alexandra Canal reports:
Comcast (CMCSA) said Thursday that it has started exploring spinning off its cable networks into a separate company. The development comes as the media industry undergoes massive disruption, with more consumers cutting the cord, or dropping their pay-TV packages.
Comcast stock rose more than 2% on Thursday morning. Read more here.
Stellantis Q3 revenue slumps but inventory is improving; 'We're grinding through a transition' CFO says
Yahoo Finance's Pras Subramanian reports:
Stellantis (STLA) reported third quarter revenue and shipments that missed estimates, though the company said it's making "progress addressing operational issues."
The stock gained more than 3% in early trading on Thursday.
Read more here.
Tech stocks lead declines as Microsoft, Meta slide
Tech stocks led the major averages lower on Thursday following quarterly results from social media giant Meta (META) and software maker Microsoft (MSFT).
The tech-heavy Nasdaq Composite (^IXIC) sank 0.7%, while the S&P 500 (^GSPC) fell over 0.7%. The Dow Jones Industrial Average (^DJI) dropped roughly 0.5%.
Meta said it would increase capital spending significantly in 2025, while Microsoft's cloud growth forecast disappointed Wall Street as the company races to expand its AI infrastructure.
Microsoft and Meta fall as spooked investors weigh hefty AI bills
Meta (META) and Microsoft (MSFT) stocks sank premarket as investors weighed their hefty artificial intelligence expenditures against the time it will take to generate a return on their investment.
Meta fell as much as 4.7% before paring losses, while Microsoft was down 3.6%. During their earnings reports the night before, both companies beat Wall Street’s expectations, but Microsoft’s weaker-than-expected sales guidance for the current quarter and Meta’s raised outlook on capital expenditures appeared to spook investors.
Meta raised the lower end of its guidance range for full-year spending from $37 billion to $38 billion, and CFO Susan Li said the company expects “significant capital expenditure growth in 2025.” Microsoft indicated in its fiscal first quarter earnings reports that spending on general artificial intelligence infrastructure (e.g., AI chips) weighed on gross margins, which it expects to continue in the current period.
Microsoft justified the spending by saying the demand for its AI products is real and that infrastructure spending is necessary to continue to meet that demand.
“Roughly half of our cloud and AI-related spend continues to be for long-lived assets that will support monetization over the next 15 years and beyond,” said Microsoft CFO Amy Hood.
Meta said it’s seeing “rapid adoption of Meta AI.”
RBC Capital analyst Rishi Jaluria said to buy the dip on Microsoft: “While investors may be hung up on the optics of decelerating Azure growth paired with substantial CapEx, we see a path to upward revisions.”
Analysts also reiterated their Buy ratings on Meta stock.
Good morning. Here's what's happening today.
Economic data: Core PCE index, (September); Initial & Continuing jobless claims, (week ending Oct. 26); Employment cost index, (third quarter); Challenger jobs cuts, (October); Personal income & Spending, (September)
Earnings: Apple (AAPL), Amazon (AMZN), Conoco Phillips (COP), Estée Lauder (EL), Kellanova (K), Intel (INTC), Mastercard (MA), Norwegian Cruise Lines(NCLH), Peloton (PTON), Merck (MRK), SiriusXM (SIRI), Comcast (CMCSA); Uber (UBER)
Here are some of the biggest stories you may have missed overnight and early this morning:
Microsoft stock slides as investors weigh earnings
Meta beats, but stock falls on heavy spending plans
Peloton names former Apple exec as CEO to steer turnaround
'Shadow campaigns': Microsoft-Google legal feud heats up
Merck beats Q3 expectations, but China Gardasil sales lag
Starbucks new CEO chats with Yahoo Finance
Starbucks (SBUX) shares are indicating a slightly higher open today despite more details about the dreadful quarter the company preannounced last week.
And I will tell you why: new CEO Brian Niccol.
I have known Niccol for about 10 years, going back to his time leading Taco Bell at Yum! Brands (YUM). One thing among many that I have noticed about him is how he really digs into problems and calmly articulates them — and an action plan — to team members and investors.
That was the same Niccol who senior reporter Brooke DiPalma and I encountered last night in a 15-minute post-earnings call phone chat. Such calm under fire will prove to be a good thing for Starbucks, as it has many, many problems to address.
Niccol seemingly has more knowledge about Starbucks in his first three months than the prior CEO gained in more than a year!
He is wasting no time fixing things at Starbucks, as Brooke reports here.
But here is one exchange I had with him on the phone regarding the need to slash the menu size by 25% or more. Cutting the Starbucks menu down is vitally important to driving a better business on the top and bottom lines.
It's good to see Niccol understand this (he made it a point to keep the Chipotle (CMG) menu small, carefully introducing a new item or two a year after thorough testing), as his predecessors never did.
