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    • Microsoft, Meta and the burden of high expectations are dragging Wall Street down
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    Microsoft, Meta and the burden of high expectations are dragging Wall Street down

    Pabio Posted on

    Stan Choe
    | Associated Press

    new York – Wall Street is feeling the blow of high expectations Thursday, as Microsoft and Meta Platforms help push U.S. stock indexes lower despite reporting strong summer profits.

    The S&P 500 was down 1.6% at midday and on track for its worst day in nearly eight weeks, falling further from its record set earlier this month. The Dow Jones Industrial Average was down 418 points, or 1%, as of 11:15 a.m. Eastern Time. The Nasdaq Composite Index was down 2.4% and heading for a second straight loss after hitting its latest all-time high.

    Microsoft reported stronger profit growth for the latest quarter than analysts expected. Its revenue also beat forecasts, but its stock still fell 6% as investors and analysts scanned for possible disappointments. Many focused on Microsoft’s estimate for future growth in its Azure cloud computing business, which fell short of some analysts’ expectations.

    Facebook’s parent company, meanwhile, also released a better-than-expected earnings report. As with Microsoft, this was not enough for the stock to increase. Investors focused on Meta Platforms’ warning that it expects a “significant acceleration” in spending next year as it continues to pour money into developing artificial intelligence . It fell 3.6%.

    Microsoft and meta-platforms have soared in recent years amid the AI ​​frenzy, and they are firmly entrenched among the most influential stocks on Wall Street. But such stellar performance has drawn criticism, saying their stock prices have simply climbed too fast, making them too expensive. It’s hard to meet everyone’s expectations when they’re so high, and Microsoft and Meta were both among the heaviest weightings in the S&P 500 on Thursday.

    The next two companies from the highly influential group of stocks known as the “Magnificent Seven” to report their latest results will be Apple and Amazon. They are expected to release their report after the day’s trading ends, and both fell at least 1.3% on Thursday.

    Earlier this month, Tesla and Alphabet launched the Magnificent Seven reports with results that investors found impressive enough to reward with higher stock prices. The only remaining member, Nvidia, will report results later in the earnings season, and its 4.3% drop is the market’s heaviest weight on Thursday after Microsoft.

    Big Tech’s fall on the last day of October helps erase the S&P 500’s gain for the month. The index is down 0.7% and on track for its first month of decline in the last six months, although it hit an all-time high in the middle of it.

    However, Wall Street has not been completely destroyed, thanks in part to cruise ships and cigarettes.

    Norwegian Cruise Line Holding rose 8.2% after posting a higher profit than analysts expected for the last quarter. The cruise ship operator said it was seeing strong customer demand for all of its brands and itineraries, and it raised its full-year 2024 profit forecast.

    Altria Group rose 7.6%, another of the S&P 500’s biggest gains after also beating analysts’ profit expectations. Chief executive Billy Gifford, among other things, highlighted the resilience of his Marlboro brand and announced a cost-cutting program.

    Oil and gas companies also generally rose after the price of a barrel of U.S. crude gained 1.3% to recoup some of its losses for the week and year so far. ConocoPhillips jumped 4.9% and Exxon Mobil jumped 1%.

    In the bond market, Treasury yields continued to rise following a series of mixed reports on the US economy.

    A report says a measure of inflation the Federal Reserve likes to use slowed to 2.1% in September from 2.3%. That comes close to matching the Fed’s 2% target, although the underlying trends, after ignoring food and energy costs, have been a bit higher than economists expected.

    A separate report said growth in workers’ wages and benefits slowed over the summer. This could put less pressure on future inflation. A third report, meanwhile, said fewer U.S. workers filed for unemployment benefits last week. This indicates that the number of layoffs remains relatively low across the country.

    Treasury yields pivoted several times following the reports before climbing. The 10-year Treasury yield rose from 4.30% to 4.31% Wednesday evening. That’s a sharp rise from the roughly 3.60% level it was at in the middle of last month.

    Yields rallied following a series of stronger-than-expected reports on the U.S. economy. Such data bolsters hopes that the economy can avoid a recession, especially now that the Fed is cutting interest rates to support the job market instead of keeping them high to quell high inflation. But this surprising resilience is also forcing traders to lower their expectations for how much the Fed will ultimately cut rates.

    In foreign stock markets, indices fell across much of Europe and Asia.

    South Korea’s Kospi fell 1.5%, one of the biggest losses after North Korea launched a new intercontinental ballistic missile designed to be able to strike the U.S. mainland, a move that was probably intended to grab America’s attention before Election Day.

    ___

    AP Business writers Yuri Kageyama and Matt Ott contributed.

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