Microsoft stock drop/ Wall Street falls/ tech stocks down/ Newslooks/ NEW YORK/ J. Mansour/ Morning Edition/ Despite strong earnings reports, Microsoft and Meta led Wall Street lower as investor expectations outpaced results. The S&P 500, Dow, and Nasdaq each fell in early trading, with a focus on Microsoft’s lower-than-expected growth forecast for its Azure cloud service. Rising Treasury yields and mixed U.S. economic data added pressure to markets.
Microsoft and Meta Lead Wall Street Decline: Quick Look
- Stock Decline: Microsoft and Meta saw share price drops despite posting strong quarterly earnings.
- Investor Disappointment: Microsoft’s Azure cloud forecast fell short of analyst expectations; Meta warned of higher AI-related spending.
- Impact on Major Indexes: The S&P 500 fell 0.8%, while the Dow lost 177 points, and the Nasdaq dropped 1.3%.
- Bond Market Reaction: Treasury yields climbed with mixed economic reports, with the 10-year yield steady at 4.3%.
- Global Market Impact: Stock indexes across Europe and Asia also declined following Wall Street’s slide.
Microsoft and Meta Lead Wall Street Decline Amid High Hopes
Deep Look
Wall Street stumbled on Thursday as high investor expectations met the reality of earnings reports from tech giants Microsoft and Meta Platforms, leading to a broader market pullback. The S&P 500, the Dow Jones Industrial Average, and the Nasdaq composite each fell in early trading, with declines continuing as the morning progressed. The S&P 500 dropped 0.8%, the Dow slid by 177 points (0.4%), and the Nasdaq composite fell 1.3%, marking its second straight loss after reaching an all-time high earlier this month.
Microsoft, a key player in the influential “Magnificent Seven” group of technology stocks, reported stronger-than-expected profit growth for the latest quarter, with revenue surpassing forecasts. However, investors found reasons for concern in the company’s growth projection for its Azure cloud-computing segment, which came in below some analysts’ predictions. Microsoft’s stock dropped 4.9% as investors recalibrated their high expectations, sending ripples across the market.
Meta Platforms, Facebook’s parent company, faced a similar scenario. The company posted better-than-expected profits, yet its stock slid 0.7% as investors reacted to Meta’s warning of a “significant acceleration” in spending planned for next year to support artificial intelligence development. The increased spending has raised concerns among investors, who worry that Meta’s escalating expenses could weigh on its profitability.
In recent years, both Microsoft and Meta have been central to the stock market’s rally, especially as excitement around artificial intelligence has fueled strong growth. However, their rapid share price increases have led to some skepticism, with critics warning that these stocks may be overpriced. High expectations make it increasingly difficult for companies like Microsoft and Meta to satisfy investors, resulting in Thursday’s sell-off and Microsoft becoming the heaviest drag on the S&P 500.
The focus will shift to two other key members of the “Magnificent Seven” later in the day: Apple and Amazon, which are set to report their earnings after the closing bell. Apple and Amazon shares were also down in morning trading, reflecting caution among investors. Tesla and Alphabet recently kicked off the group’s earnings season with results that pleased investors, temporarily bolstering their share prices.
On the economic front, U.S. Treasury yields rose following a series of mixed reports about the U.S. economy. One report showed that the Federal Reserve’s preferred inflation measure dipped to 2.1% in September from 2.3% in August, approaching the Fed’s 2% target. Yet core inflation—which excludes volatile food and energy prices—was slightly higher than economists expected, suggesting some lingering inflationary pressures.
Additional economic data included a report indicating that wage and benefit growth for U.S. workers slowed over the summer, which could reduce future inflationary pressures. Another report revealed a decline in initial jobless claims last week, signaling a low level of layoffs across the nation.
Bond yields were volatile following these economic releases, with the yield on the 10-year Treasury note settling around 4.30% by mid-morning, up sharply from around 3.60% last month. Treasury yields have been on the rise amid stronger-than-expected U.S. economic data, which has bolstered hopes that the economy may avoid a recession. However, as the economy shows resilience, traders are scaling back their expectations for deep rate cuts by the Fed.
Global stock markets mirrored the cautious sentiment in the U.S., with indexes across Europe and Asia also trading lower on Thursday. The interconnectedness of major markets means that fluctuations in U.S. tech stocks and bond yields continue to have far-reaching effects, influencing investor sentiment worldwide.
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