S&P 500 Wipes Out October Gains as Big Tech Hit: Markets Wrap

(Bloomberg) — Stocks wiped out their October advance, with Microsoft Corp. and Meta Platforms Inc. weighing heavily on Wall Street trading after disappointing outlooks.

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Equity investors grappling with an overwhelming slew of corporate results sent the S&P 500 down by 1.3%. The slide halted a streak of monthly gains that would have been the longest since 2021. The Nasdaq 100 dropped 1.9%. Treasuries didn’t do much on Thursday, but were set for their biggest monthly selloff in about two years as traders trimmed bets on aggressive rate cuts by the Federal Reserve with the economy showing signs of strength.

“The market overall has been disappointed with mega-tech guidance,” said Quincy Krosby at LPL Financial. “Moreover, there’s a nearly palpable narrative taking hold that the election – rather than offering the market a sense of certainty – will do just the opposite, causing volatility to spike significantly higher.”

That’s not to mention the all-important jobs report on Friday. In the run-up to the figures, data showed US unemployment claims fell to their lowest since May. Meantime, both a key inflation gauge and spending picked up.

The S&P 500 dropped to around 5,735. The Dow Jones Industrial Average fell 0.7%. A Bloomberg gauge of the “Magnificent Seven” megacaps tumbled 2.4%. Microsoft dropped 4.8% and Meta slipped 2.7%. Apple Inc. and Amazon.com Inc., which report results after the close, were also down.

Treasury 10-year yields advanced one basis point to 4.31%. The dollar wavered. UK bonds tumbled, extending a selloff triggered this week by the Labour government’s plans for borrowing and fiscal stimulus over the coming years.

The guidance out of Microsoft and Meta raise some of the same questions that we heard during the last earnings season, according to Matt Maley at Miller Tabak + Co. Back then, he says it became evident that the big jump in earnings that the chipmakers were experiencing had not broadened out to the end users of those chips

“Thankfully, Alphabet did show some signs that their ROI on the AI phenomenon is bearing some fruit,” Maley said. “However, last night’s results do seem to indicate that it could still be a much longer time for these returns to build up in a significant way for many companies — at least when you compare it to the timeframe investors have been assuming for much of this year.”

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If that is indeed the case, it’s going to be much tougher for the investors to justify today’s very expensive stock market which is especially true given that longer-term yields have been rising at a steady and material pace over the past six weeks, Maley noted.

Investors need to make sure they have diversification within tech and that they are not solely invested in the parts of the AI trade that have worked such as semiconductors, according to Michael Landsberg, chief investment officer, Landsberg Bennett Private Wealth Management.

“It makes some sense to trim some from those names that have worked so well over the past 12-18 months and look for AI laggards as well as other tech themes like cybersecurity, robotics and automation, and smart homes and cities,” he said.

“So far, none of the primary trends we are tracking have been negated, so we continue to view the weakness as profit-taking/consolidation overall,” said Dan Wantrobski at Janney Montgomery Scott. “Although trading charts are already starting to press into moderately oversold territory, so we would anticipate a counter-trend bounce to materialize relatively soon.”

Corporate Highlights:

• Mastercard Inc. reported profit that beat analysts’ estimates, helped by a boost in cross-border transactions.

• Merck & Co. lowered the top end of its full-year sales guidance after demand for its HPV vaccine fell for a second straight quarter in China.

• Uber Technologies Inc. reported weaker-than-expected ride bookings and issued a middling forecast for the holiday quarter, even as it delivered record operating profit.

• ConocoPhillips raised its production forecast for the year after surpassing output expectations in the third quarter.

• Estée Lauder Cos. pulled its guidance for the year, citing uncertainty over a new chief executive and weak demand in China.

• Roblox Corp., a video-game company, reported third-quarter bookings that beat analysts’ expectations and boosted its guidance for the full year, as the platform’s user base surged.

• Norwegian Cruise Line Holdings Ltd. boosted its profit outlook for a fourth time this year as demand for sailings remains high, defying fears a slowdown in the wider leisure travel industry.

• MetLife Inc. tumbled after the insurer reported third-quarter private equity returns that weighed on variable investment income.

• Peloton Interactive Inc. named Ford Motor Co. executive Peter Stern as its next chief executive officer, entrusting him to lead a turnaround of the long-struggling fitness company.

• Carvana Co. surged after the online used-car retailer reported higher-than-expected results for the most recent quarter, as growing sales and cost cutting brought about stronger profits and a better outlook for the rest of the year.

• Comcast Corp. said it’s considering spinning off its cable networks into a new company as it grapples with the continuing industry-wide decline in subscribers.

• DoorDash Inc. beat Wall Street’s expectations on virtually every key earnings metric, allowing the delivery service to post its first operating profit since the start of the pandemic.

• Robinhood Markets Inc. fell after the brokerage reported revenue that missed analyst estimates because of a customer promotion program that required the firm to offset a portion of the haul.

• Roku Inc., a manufacturer of set-top boxes used to stream TV, said it will no longer report the number of households that use its products each quarter, starting next year.

• Cigna Group jumped after Chief Executive Officer David Cordani signaled the company is focused on returning cash to shareholders through buybacks rather than a possible deal with Humana Inc.

• Clorox Co. raised its annual profit guidance after increased advertising helped the bleach maker fully regain the market share that it lost when a cyberattack disrupted production last year.

• Altria Group Inc. kicked off a plan to cut at least $600 million of costs over the next five years as the tobacco group maintained its outlook for the year.

• MicroStrategy Inc. has hired banks to help it raise $42 billion through the sale of new shares and fixed income to buy more Bitcoin after a flurry of deals over the past year.

• Coinbase Global Inc., the largest US crypto exchange, posted results below Wall Street expectations even though revenue almost doubled.

• Samsung Electronics Co. declared progress in supplying its most advanced AI memory chips to Nvidia Corp., seeking to reassure to investors who fear the company is falling further behind SK Hynix Inc. in a red-hot market.

Key events this week:

• China Caixin manufacturing PMI, Friday

• US employment, ISM manufacturing, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.3% as of 10:36 a.m. New York time

• The Nasdaq 100 fell 1.9%

• The Dow Jones Industrial Average fell 0.7%

• The Stoxx Europe 600 fell 1.4%

• The MSCI World Index fell 1.2%

• Bloomberg Magnificent 7 Total Return Index fell 2.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.1% to $1.0870

• The British pound fell 0.3% to $1.2919

• The Japanese yen rose 0.5% to 152.62 per dollar

Cryptocurrencies

• Bitcoin fell 2.4% to $71,091.45

• Ether fell 4.1% to $2,569.72

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.31%

• Germany’s 10-year yield advanced three basis points to 2.42%

• Britain’s 10-year yield advanced 15 basis points to 4.50%

Commodities

• West Texas Intermediate crude rose 0.9% to $69.25 a barrel

• Spot gold fell 1.4% to $2,747.29 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Robert Brand.

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