On Thursday, the U.S. stock market took a nosedive, mainly because of technology and technology-related giant companies’ shares. This happened as investors tried to make sense of the mixed quarterly earnings reports and signs that the economy is holding up well, which might make the Federal Reserve maintain high interest rates for longer than expected.
All three major U.S. stock market indicators ended the day with losses, and they’re also heading for a weekly decline.
The Nasdaq, which is known for having many tech companies, had the largest percentage drop. This was because of concerns about the earnings outlook and the idea that interest rates might stay high for an extended period.
The NYSE FANG+ index, which includes trendy and fast-growing stocks, dropped by 2.7%.
“Today, it’s all about the ‘magnificent seven,’ and it seems like nothing they could have announced about their earnings would have satisfied people,” said Scott Ladner, the chief investment officer at Horizon Investments in Charlotte, North Carolina. “So we’re seeing investors cashing in their gains and moving their money from what’s been successful this year to things that haven’t.”
We’re in the middle of the third quarter reporting season, and about one-third of the companies in the S&P 500 are set to reveal their results this week.
As of the latest data, approximately four out of five companies are surpassing their earnings expectations. According to LSEG, the most recent estimates from analysts suggest that S&P 500 earnings are expected to grow by 2.6% compared to the previous year.
A bunch of strong data came in, including a 4.9% increase in the third-quarter GDP, which is the best we’ve seen in almost two years. But this made investors worried about the Federal Reserve’s strict monetary policy.
“According to Greg Bassuk, CEO of AXS Investments in New York, investors were considering the robust economic data in the context of the Federal Reserve’s assertive policies, making it appear less probable that the Fed would begin lowering interest rates in 2024.”
Ironically, even though the economic numbers are good, they make investors more concerned that the Fed will keep interest rates high for a longer time.
The Dow Jones Industrial Average dropped by 251.63 points, which is about 0.76%, and it now stands at 32,784.3. The S&P 500 saw a bigger decline, losing 49.54 points, or about 1.18%, bringing it to 4,137.23. The Nasdaq Composite also took a hit, going down by 225.62 points, which is roughly 1.76%, and it’s now at 12,595.61.
Out of the 11 major sectors in the S&P 500, communication services had the biggest percentage loss, falling by 2.6%. On the other hand, real estate gained the most, rising by 2.2% during the session.
Meta Platforms managed to beat expectations for its third-quarter revenue and profit. However, they mentioned that their spending in 2024 might be higher than what analysts had predicted, and they also noted that the conflict in Israel could affect their sales in the fourth quarter. As a result, their shares fell by 3.7%.
United Parcel Service (UPS) decreased its revenue forecast for 2023, and this led to a 5.9% drop in their shares.
The chipmaker Western Digital Corp saw a significant decline of 9.3% because their merger talks with Japan’s Kioxia Holdings fell through.
IBM’s stock (IBM.N) saw a 4.9% increase after they reported quarterly earnings that beat expectations. This was due to strong demand for their software solutions.
Amazon.com’s shares (AMZN.O) went up in after-hours trading when the e-commerce giant revealed quarterly revenue that exceeded expectations.
On the New York Stock Exchange (NYSE), there were more declining stocks than advancing ones, with a ratio of about 1.02 to 1. On the Nasdaq, the ratio was 1.14 to 1, favoring decliners.
In terms of new stock price highs and lows, the S&P 500 didn’t see any new 52-week highs, but there were 35 new lows. Meanwhile, the Nasdaq Composite had 13 new highs and 429 new lows.
The trading volume on U.S. exchanges reached 11.63 billion shares, which is higher than the 10.72 billion shares traded on an average full trading day over the past 20 days.
