Tech Titans Tumble: Microsoft, Meta, and More Plummet on Wall Street Amid Sluggish Earnings

MS and Meta are disappointed despite better-than-expected performance
Microsoft’s sales outlook is disappointing… Meta is concerned about capital expenditure
September PCE prices increased by 2.1% compared to the previous year
Pay attention to the October employment report

The three major indices of the New York stock market all closed lower on the 31st (local time). This is the aftermath of a plunge in technology stocks as investor sentiment weakened following the announcement of disappointing performance reports by Microsoft (MS) and Facebook’s parent company Meta the previous day. The inflation indicator that the U.S. Federal Reserve (Fed) values ​​is close to the target of 2%, so it is expected that the trend of gradual interest rate cuts will continue.

On this day in the New York stock market, the blue chip Dow Average closed at 41,763.46, down 378.08 points (0.9%) from the previous trading day. The S&P 500 index, centered on large-cap stocks, fell 108.22 points (1.86%) to 5,705.45, and the Nasdaq index, centered on technology stocks, closed at 18,095.15, down 512.78 points (2.76%).

By stock, technology stocks were weak. Microsoft fell 6.05%. Although the company announced quarterly results that exceeded market expectations the previous day, the selling trend accelerated as the sales forecast for the October-December quarter of this year fell short of Wall Street expectations. The growth rate of sales of Azure, a cloud service, was also expected to slow compared to the previous quarter. The meta also fell by 4.09%. Although quarterly performance exceeded market expectations, the number of Facebook users in the third quarter fell short of expectations, and the fact that capital expenditures will increase next year was a drag on the stock price. Artificial intelligence (AI) leader Nvidia fell 4.72% and AMD fell 3.06%. Super Micro Computer, which was embroiled in suspicions of accounting manipulation, plunged 11.97%.

“We have reached a point where the passion and potential for AI alone is not enough,” said Ross Mayfield, investment strategist at Baird Private Wealth Management. “We are not providing enough,” he pointed out.

On this day, the market paid attention to Big Tech (large information technology companies) such as Apple and Amazon, which were scheduled to announce their earnings. After the market closed on this day, Amazon announced that its sales in the third quarter of this year were $158.88 billion and earnings per share (EPS) were $1.43. It exceeds market research firm LSEG’s forecast (sales of $157.2 billion, EPS of $1.14). Amazon, which fell 3.39% in regular trading on this day, is jumping 3.97% in after-hours trading after announcing earnings that exceeded expectations.

Inflation indicators were released this morning. According to the U.S. Department of Commerce, the personal consumption expenditures (PCE) price index rose 2.1% in September compared to the same period last year. This figure is in line with market expectations (2.1%). Core PCE prices, which show the basic trend of prices excluding highly volatile energy and food products, rose 2.7% compared to the previous year, slightly exceeding the forecast (2.6%). As inflation meets the Fed’s target, the market expects the trend of gradual interest rate cuts to continue. According to FedWatch of the Chicago Mercantile Exchange (CME), the federal funds interest rate futures market today reflects a 96.7% possibility that the Fed will cut interest rates by 0.25 percentage points at the Federal Open Market Committee (FOMC) in November. The forecast for interest rates to be frozen is 3.3%.

“The scenario investors want to see is rising growth and falling inflation,” said Jamie Cox, managing director at Harris Financial Group. “There is no need to be afraid of an economy that is growing stably,” he analyzed.

Employment was also confirmed to be solid. On this day, the U.S. Department of Labor announced that the number of new unemployment claims last week (October 20-26) was 216,000, a decrease of 12,000 from the previous week’s revised figure. It is the lowest level since last May. Expert expectations (229,000 cases) were also 13,000 cases lower. The number of continued unemployment claims, which are those who claim unemployment benefits for at least two weeks, recorded 1.862 million during the week of October 13 to 19, falling below both the previous week’s revised figure (1.888 million) and the market forecast (1.89 million). The job market appears to be recovering in the aftermath of Hurricanes Healan and Milton. More accurate employment trends are expected to be confirmed in the U.S. Department of Labor’s October employment report, which will be released the next day.

Government bond interest rates are on the rise. The U.S. 10-year maturity Treasury bond interest rate, which is a global bond interest rate benchmark, is recording 4.28%, up 2bp (1bp=0.01% point) from the previous trading day. The two-year maturity government bond interest rate is at 4.16%, up 1bp from the previous day.

International oil prices rose. West Texas Intermediate (WTI) closed at $69.26 per barrel, up $0.65 (1.0%) from the previous trading day, and Brent crude oil, the global crude oil price benchmark, closed at $73.16 per barrel, up $0.61 (0.8%).