Negative Reaction To Microsoft, Meta Results Leads To Sell-Off On Wall Street

After moving sharply lower early in the session, stocks continued to see considerable weakness throughout the trading day on Thursday. The Nasdaq saw a particularly steep drop on the day amid a sell-off by technology stocks.

The major averages saw further downside going into the close, ending the session near their worst levels of the day. The Nasdaq plunged 512.78 points or 2.8 percent to 18,095.15, the S&P 500 tumbled 108.22 points or 1.9 percent to 5,705.45 and the Dow slumped 378.08 points or 0.9 percent to 41,763.46.

The sell-off on Wall Street came amid a negative reaction to earnings news from tech giants Microsoft (MSFT) and Meta Platforms (META).

Shares of Microsoft plunged by 6.0 percent after the company reported better than expected fiscal first quarter results but provided disappointing revenue guidance for the current quarter.

Facebook parent Meta also dove by 4.1 percent after reporting third quarter earnings that beat estimates but weaker than expected user growth. Meta also forecast an increase in capital spending due to AI investments.

Traders were also reacting to closely watched consumer price inflation data that largely came in line with economist estimates.

The Commerce Department said its personal consumption expenditures (PCE) price index rose by 0.2 percent in September and the annual rate of growth slowed to 2.1 percent, which both matched expectations.

However, the annual rate of growth by the core PCE price index, which excludes food and energy prices, was unchanged from the previous month at 2.7 percent. Economists had expected the pace of growth to slow to 2.6 percent.

The slightly faster than expected core price growth may have added to recent concerns the Federal Reserve will lower interest rates more slowly than hoped.

“The year-over-year core PCE print indicated a 2.7% increase suggesting that the Fed is still on a bumpy course in this last mile to quell inflation and declare victory,” said Quincy Krosby, Chief Global Strategist for LPL Financial.

She added, “Although a 25-basis point move lower at the next Fed meeting is expected the Fed will need to acknowledge that with still resilient consumer spending, higher wages from a series of successful strikes, and a solid labor market, they will need to adopt the “gradual” approach towards lowering rates until there’s a comfort level within the FOMC that inflation isn’t poised to continue edging higher.”

A report from the Labor Department showing initial jobless claims unexpectedly fell to a five-month low last week may also have added to the worries about slower rate cuts.

Sector News

With Microsoft helping lead the way lower, software stocks saw substantial weakness on the day, dragging the Dow Jones U.S. Software Index down by 4.3 percent.

Significant weakness was also visible among semiconductor stocks, as reflected by the 4.0 percent nosedive by the Philadelphia Semiconductor Index. The index tumbled to its lowest closing level in over a month.

Gold stocks also moved sharply lower along with the price of the precious metal, resulting in a 3.2 percent slump by the NYSE Arca Gold Bugs Index.

Computer hardware, commercial real estate and brokerage stocks also saw considerable weakness, while utilities and energy stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Thursday. Japan’s Nikkei 225 Index fell by 0.5 percent and Hong Kong’s Hang Seng Index eased by 0.3 percent, although China’s Shanghai Composite Index bucked the downtrend and rose by 0.4 percent.

The major European markets also moved to the downside on the day. While the French CAC 40 Index slumped by 1.1 percent, the German DAX Index slid by 0.9 percent and the U.K.’s FTSE 100 Index declined by 0.6 percent.

In the bond market, treasuries regained ground after coming under pressure in early trading but still closed modestly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.8 basis points to a three-month closing high of 4.284 percent.

Looking Ahead

The Labor Department’s monthly jobs report is likely to be in the spotlight on Friday, although a reading on manufacturing activity may also attract attention along with the latest earnings news.

Apple (APPL), Amazon (AMZN) and Intel (INTC) are among the companies releasing their quarterly results after the close of today’s trading, while Exxon Mobil (XOM) and Chevron (CVX) are due to report their results before the start of trading on Friday.