The Nasdaq and S&P 500 closed lower on Wednesday as chip stocks tumbled and investors await a host of corporate earnings.
Shares of Alphabet, the first of the five “Magnificent Seven” megacap stocks that report results this week, rose after the company beat expectations for third-quarter revenue and profit on strength in its cloud business and YouTube ad sales.
Microsoft and Meta Platforms are set to report results after the bell, which are expected to provide insight into whether heavy AI investment is translating into better company performances.
Alphabet helped to offset falling chip stocks, weighed by dour forecasts from Advanced Micro Devices and Qorvo.
Meanwhile, shares of Super Micro Computer plunged after Ernst & Young resigned as the company’s accountant. Nvidia was also down.
The Information Technology sector was the biggest sectoral decliner, while Alphabet’s gains lifted the Communication Services sector.
“Qorvo, Advanced Micro and Super Micro - those are three pretty big moves that are causing a little bit of angst and taking some of the bloom off the rose from the stellar print from Google last night,” said Michael James, managing director of equity trading at Wedbush Securities.
“The clear laser focus is going to be on the stock specific reports and guides,” James said.
According to preliminary data, the S&P 500 lost 16.01 points, or 0.27%, to end at 5,816.91 points, while the Nasdaq Composite lost 96.37 points, or 0.52%, to 18,616.38. The Dow Jones Industrial Average fell 65.14 points, or 0.15%, to 42,167.91.
In economic data, the U.S. gross domestic product increased at a 2.8% annualized rate, according to the Commerce Department’s advance estimate of third-quarter GDP, slightly below economists’ forecast of 3.0% growth.
A separate report showed U.S. private payrolls growth surged by a higher-than-expected 233,000 jobs in October.
The neck-and-neck race between U.S. presidential candidates Kamala Harris and Donald Trump was also at the top of investors’ minds ahead of the Nov. 5 election.
Starbucks is also set to report earnings after the close.
UK markets were spared painful blows from the new Labour government’s first budget on Wednesday, which announced 40 billion pounds of tax hikes to plug shortfalls but soothed jitters about public spending blowouts and debt market disorder.
As finance minister Rachel Reeves balanced big debt and investment increases with pledges for tough control of day-to-day spending, investors’ fears of a potential repeat of then-prime minister Liz Truss’ chaotic September 2022 mini-Budget eased.
Government borrowing costs measured by 10-year gilt yields touched their highest since May at around 4.38%, but the move was modest in comparison to the surge two years ago. Sterling rose, meanwhile, and the domestically-focused FTSE mid-250 index briefly jumped more than 1.5%.
“Investors feared a new Liz Truss moment, but in the end the announcements do not suggest an uncontrolled surge in debt,” Edmond de Rothschild Asset Management portfolio manager Nabil Milali said.
Investors pre-budget nerves had risen after data showed British public borrowing had reached nearly 100% of GDP and Reeves accused the former Conservative government, which Labour replaced in July’s landslide election win, of creating a 22 billion pound fiscal “black hole”.
In a sign of the unease, shares in UK retailers and pub operators had slumped for days and gilt yields had risen.
But after Reeves on Wednesday outlined about 100 billion pounds of capital spending over the next five years and directed tax grabs towards businesses instead of workers, the FTSE 250 index ended Wednesday higher while UK retail and banking stocks bounced.
“If this had been a more fiscally conservative budget you’d have expected gilts to rally further and equities to sell-off,” Artemis fixed income manager Liam O’Donnell said.
Kommentarer