Markets Slide as Tech Giants Disappoint Investors
Key indices show declines amid mixed economic indicators and cautious sentiment ahead of major earnings reports.
The S&P 500 Index ($SPX) (SPY) is down -0.88%, while the Dow Jones Industrials Index ($DOWI) (DIA) has fallen -0.46%. The Nasdaq 100 Index ($IUXX) (QQQ) experiences a steeper decline, dropping by -1.40%.
Today, stocks are generally lower, reaching new three-week lows for the S&P 500 and Dow Jones, and a one-week low for the Nasdaq. This downturn is largely attributed to disappointing earnings from Microsoft and Meta Platforms, adversely affecting tech stocks and the overall market mood. Additionally, today’s economic news has been mixed: while weekly initial unemployment claims dropped unexpectedly to a five-month low, personal spending exceeded expectations, and the September core PCE price index held steady at +2.7% year-over-year.
Despite these challenges, there was some positive news. Falling wage pressures were noted as the Q3 employment cost index showed the slowest growth in three years. This development, combined with stronger-than-anticipated economic data, suggests a possible soft landing for the economy.
On a brighter note, Paycom Software’s stock surged over +20% following strong Q3 revenue figures and a boosted revenue forecast. Similarly, Booking Holdings saw a hike of over +6% after reporting robust Q3 gross bookings, and Etsy shares climbed more than +9% after exceeding revenue expectations for the quarter.
The labor market displayed unexpected strength this week, as initial unemployment claims fell by -12,000 to a surprising total of 216,000, contrary to projections of an increase to 230,000. The Q3 employment cost index rose by +0.8% quarter-on-quarter, coming in below the +0.9% forecast and marking the slowest growth in three years.
Looking at personal finances, September’s personal spending increased by +0.5% month-on-month, outpacing the +0.4% expectation. Meanwhile, personal income rose +0.3%, aligning with analyst predictions.
Interestingly, the September core PCE price index remained stable at +2.7% year-on-year, slightly stronger than anticipated at +2.6%.
Market caution remains, particularly as investors await earnings reports from tech giants Amazon and Apple, scheduled for after Thursday’s market close. Moreover, attention is gearing up for Friday’s U.S. October unemployment report, which is expected to show an increase of +90,000 jobs amidst ongoing strike and storm disruptions, with the unemployment rate forecasted to hold steady at 4.1%. This comes as the U.S. prepares for next Tuesday’s important election.
During this peak week for corporate Q3 earnings, 76% of S&P 500 companies that have reported so far have exceeded earnings estimates. Forecasts indicate that S&P 500 companies may see a +4.3% year-over-year earnings growth for Q3, a decline from the +7.9% growth projected in July.
Market participants are pricing in a 94% likelihood of a 25 basis points rate cut in the upcoming November 6-7 FOMC meeting, while the chance of a 50 basis points cut stands at 0%.
International markets show mixed results today. The Euro Stoxx 50 has dipped to a six-week low, declining -0.65%. Conversely, China’s Shanghai Composite Index closed up +0.42%, while Japan’s Nikkei Stock 225 fell by -0.50%.
Interest Rates
December 10-year T-notes (ZNZ24) are down -10 ticks, with the yield rising +2.3 basis points to 4.303%. The decline in T-notes is partly driven by negative carryover from falling European government bond prices. T-notes continued to slide following news of lower weekly jobless claims and a higher-than-expected September core PCE price index—both seen as hawkish indicators for Federal Reserve policy. Additionally, rising inflation expectations weighed on T-notes, with the 10-year breakeven inflation rate climbing to a four-and-three-quarter month high of 2.358%. However, losses were somewhat mitigated by easing wage pressures reflected in the Q3 employment cost index.
Across Europe, government bond yields are trending upwards. The 10-year German bund yield reached a three-month high of 2.436%, up +4.4 basis points. Meanwhile, the British 10-year gilt yield rose to a ten-and-three-quarter month high of 4.473%, increasing by +11.9 basis points.
In the Eurozone, unemployment remains steady at a record low of 6.3%, defying expectations of a rise to 6.4%. Additionally, the October CPI increased by +2.0% year-on-year, surpassing the +1.9% forecast, while core CPI rose +2.7% year-on-year, against a +2.6% expectation.
German retail sales unexpectedly surged by +1.2% month-on-month, contrasting earlier projections of a -0.6% decline.
The European Central Bank (ECB) is focused on keeping inflation in check. Governing Council member Panetta emphasized that “monetary conditions are still tight,” indicating that further measures may be necessary to prevent inflation from dropping too low.
Swaps are currently indicating a 100% probability of a 25 basis points rate cut at the ECB’s policy meeting on December 12, with a 20% chance of a 50 basis points cut during that meeting.
US Stock Movers
Meta Platforms (META) has seen its shares decline by over -2%, despite reporting better-than-expected Q3 earnings per share. The company’s lack of details regarding its 2025 capital expenditure plans has left investors uncertain.
Microsoft (MSFT) shares dropped more than -5% today, leading losses within the Dow Jones, following a solid Q1 earnings report. While Azure cloud revenue growth remains solid at +34%, it slightly fell from +35% growth in the previous quarter. The company also projected a growth of +31% to +32% for Q2 Azure revenue.
Investor sentiment is also sour for chip stocks today, with Broadcom (AVGO) down over -3%. Other notable declines include Nvidia (NVDA), KLA Corp (KLAC), ON Semiconductor (ON), NXP Semiconductors NV (NXPI), Micron Technology (MU), Marvell Technology (MRVL), and Analog Devices (ADI), each falling by more than -2%.
eBay (EBAY) reported a staggering decline of more than -9%, forecasting Q4 revenue of $2.53 billion to $2.59 billion, which did not meet analyst expectations of $2.64 billion.
Estee Lauder (EL) shares plummeted by over -22% after issuing a Q2 adjusted earnings per share forecast of just 20 to 35 cents, far below the consensus estimate of $1.05. Furthermore, the company retracted its 2025 fiscal outlook and reduced its dividend from 66 cents to 35 cents per share.
Super Micro Computer (SMCI) saw its stock drop over -14%, compounding an earlier plunge of -32% after Ernst & Young LLP resigned as the company’s auditor due to a Justice Department probe into its accounting practices.
Arm Holdings (ARM) shares fell by more than -7% after Bernstein downgraded the stock to underperform from market perform with a price target set at $100.
MGM Resorts International (MGM) decreased by over -8% after it reported Q3 adjusted earnings per share of 54 cents, which missed the expected 59 cents.
Huntington Ingalls Industries (HII) is down more than -22% as the largest loser in the S&P 500 after reporting Q3 earnings per share of $2.56, significantly lower than the consensus estimate of $3.85.
In contrast, Paycom Software (PAYC) leads gainers in the S&P 500 with a rise of more than +20% after reporting Q3 revenue of $451.9 million, surpassing the expected $447.2 million, while raising its lower forecast for full-year revenue to $1.87 billion.
International Paper (IP) increased by more than +7% after delivering a Q3 adjusted operating earnings per share of 44 cents, well above expectations of 25 cents.
After posting Q3 revenue of $662.4 million, Etsy (ETSY) saw its shares rise more than +9%, exceeding the market’s consensus of $652.4 million. Booking Holdings (BKNG) is up more than +5%, buoyed by Q3 gross bookings of $43.4 billion, surpassing the consensus of $41.37 billion.
Comcast (CMCSA) reported an adjusted earnings per share of $1.12 billion in Q3, an outcome that was better than the anticipated $1.06, contributing to the stock’s rise of more than +3%.
Carvana (CVNA) shares are up over +19% after reporting Q3 vehicle unit sales of 108,651, surpassing the estimated 106,702 units.
Confluent (CFLT) saw a significant increase of more than +21% as it reported Q3 adjusted earnings per share of 10 cents, exceeding expectations of 5.2%. The company has also raised its full-year adjusted EPS forecast to 25 cents, up from previous projections of 19 to 20 cents, stronger than the consensus of 21 cents.
Earnings Reports (10/31/2024)
AES Corp/The (AES), Alliant Energy Corp (LNT), Altria Group Inc (MO), Amazon.com Inc (AMZN), Amcor PLC (AMCR), AMETEK Inc (AME), Apple Inc (AAPL), Aptiv PLC (APTV), Ball Corp (BALL), BorgWarner Inc (BWA), Bristol-Myers Squibb Co (BMY), Camden Property Trust (CPT), Cigna Group/The (CI), CMS Energy Corp (CMS), Comcast Corp (CMCSA), ConocoPhillips (COP), Coterra Energy Inc (CTRA), Eastman Chemical Co (EMN), Eaton Corp PLC (ETN), Entergy Corp (ETR), Erie Indemnity Co (ERIE), Estee Lauder Cos Inc/The (EL), Generac Holdings Inc (GNRC), Huntington Ingalls Industries (HII), IDEXX Laboratories Inc (IDXX), Ingersoll Rand Inc (IR), Intel Corp (INTC), Intercontinental Exchange Inc (ICE), International Paper Co (IP), IQVIA Holdings Inc (IQV), Juniper Networks Inc (JNPR), Kellanova (K), Kimco Realty Corp (KIM), Linde PLC (LIN), Mastercard Inc (MA), Merck & Co Inc (MRK), Norwegian Cruise Line Holdings (NCLH), Parker-Hannifin Corp (PH), Quanta Services Inc (PWR), Regeneron Pharmaceuticals Inc (REGN), Southern Co/The (SO), Teleflex Inc (TFX), Uber Technologies Inc (UBER), VICI Properties Inc (VICI), WEC Energy Group Inc (WEC), Willis Towers Watson PLC (WTW), WW Grainger Inc (GWW), Xcel Energy Inc (XEL), and Xylem Inc/NY (XYL).
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
