Stocks Plunge as Meta and Microsoft Report Earnings; Dollar Weakens

World stock indexes experienced a significant downturn on October 31, 2024, primarily driven by disappointing earnings reports from tech giants Meta Platforms and Microsoft. The Nasdaq Composite fell over 2%, reflecting investor concerns about rising costs associated with artificial intelligence investments. Meanwhile, the U.S. dollar dipped slightly following economic data that did not indicate any imminent changes to Federal Reserve policy.

Key Takeaways

• Market Decline: The Nasdaq dropped 2.76%, while the S&P 500 and Dow Jones fell 1.86% and 0.90%, respectively.
• Earnings Impact: Meta shares fell 4.1% and Microsoft 6% after both companies warned of increased capital expenditures.
• Economic Data: U.S. consumer spending rose slightly more than expected, but labor costs showed the smallest gain since 2021.
• Dollar Weakness: The dollar index fell 0.2%, pressured by international economic developments.

Earnings Reports Weigh on Tech Stocks

The earnings season has been particularly challenging for major technology companies. Despite reporting better-than-expected results, both Meta and Microsoft saw their stock prices decline sharply.

1. Meta Platforms:
2. Microsoft:

These results have led to a broader sell-off in the tech sector, with investors reassessing the valuations of these dominant companies.

Broader Market Reactions

The declines in tech stocks contributed to a broader market downturn, with the S&P 500 and Dow Jones Industrial Average also experiencing losses.

• S&P 500: Fell 108.22 points to 5,705.45.
• Dow Jones: Dropped 378.08 points to 41,763.46.
• Nasdaq Composite: Decreased by 512.78 points to 18,095.15.

This marks the first monthly loss for the S&P 500 in five months, highlighting a shift in investor sentiment.

Economic Indicators and Their Impact

Recent U.S. economic data showed mixed signals, contributing to the market’s volatility.

• Consumer Spending: Increased slightly more than expected in September, suggesting a stronger economic trajectory.
• Employment Cost Index (ECI): Rose 0.8% in Q3, the smallest gain since Q2 2021, indicating potential easing in inflation pressures.

These indicators have led traders to anticipate a 25 basis point cut in interest rates at the upcoming Federal Reserve meeting, although uncertainty remains high due to the upcoming U.S. presidential election.

Global Currency Movements

The dollar faced pressure against other currencies, particularly after the Bank of Japan adopted a less dovish stance than anticipated.

• Dollar Index: Fell 0.2% to 103.88.
• Euro: Strengthened slightly against the dollar, trading at $1.0859.
• Yen: The dollar was down 0.8% against the yen, trading at 152.18.

Conclusion

The combination of disappointing earnings from major tech companies and mixed economic signals has led to a notable decline in stock markets. Investors are now closely watching upcoming economic reports and the political landscape as they navigate this turbulent market environment.

Sources

• Stocks tumble with Meta, Microsoft; dollar dips after US data | Reuters, Reuters.
• S&P 500 futures fall as Meta and Microsoft lead tech slide – MarketWatch, MarketWatch.
• Stock Market News, Oct. 31, 2024: Nasdaq Falls 2.8% Amid Tech Selloff, Slide in Meta, Microsoft Shares, WSJ.