[New York Stock Market] Semiconductor Stocks Plunge, Broad Decline... Supermicro Drops 32.7%

Decline in Semiconductor Stocks Including Nvidia and AMD
MS and Meta Earnings Exceed Forecasts
3rd Quarter High Growth of 2.8% Driven by Consumer Spending
October Private Sector New Jobs Expected to Surpass 233,000

The three major indices of the U.S. New York stock market all closed lower on the 31st (local time). Semiconductor stocks fell sharply, dragging the indices down. The market digested the consecutive earnings reports from big tech companies, solid U.S. third-quarter economic growth, and employment data released this week.

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On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 42,141.54, down 91.51 points (0.22%) from the previous trading day. The large-cap-focused S&P 500 index fell 19.25 points (0.33%) to 5,813.67, and the tech-heavy Nasdaq index dropped 104.82 points (0.56%) to close at 18,607.93.

By individual stocks, Nvidia declined 1.36%. Semiconductor company AMD showed a 10.62% drop as its fourth-quarter revenue forecast failed to meet investors' expectations. Super Micro Computer, which had been under suspicion for accounting manipulation, plunged 32.68% after the accounting firm responsible for auditing resigned, raising doubts about the company's credibility. Construction equipment maker Caterpillar fell 2.13% after its third-quarter earnings missed expectations and it lowered its annual revenue forecast. Alphabet, Google's parent company, which reported better-than-expected earnings the previous day, rose 2.92%.

The market's attention was focused on big tech earnings announcements. Microsoft (MS) reported after the market close that its fiscal first-quarter revenue was $65.59 billion, with earnings per share (EPS) of $3.30. This exceeded the forecast by market research firm LSEG, which had predicted revenue of $64.51 billion and EPS of $3.10. Meta, Facebook's parent company, also posted better-than-expected results, with revenue of $40.59 billion and EPS of $6.03, surpassing LSEG's estimates of $40.29 billion and $5.25 EPS. MS shares rose 0.13% during regular trading and were up 0.8% as of 4:11 p.m. after hours. Meta shares fell 0.25% in regular trading and were down 2.75% after hours.

Sam Stovall, Chief Investment Strategist at CFRA Research, analyzed, "The earnings results of tech companies appear to still encourage investors who have been overbought on big tech." Rob Haworth, Senior Investment Strategist at U.S. Bank Asset Management, said, "We are closely monitoring tech companies' earnings to ensure that investments in artificial intelligence (AI) and productivity improvements can support strong future profit growth."

The U.S. third-quarter economic growth rate, released that morning, showed solid figures supported by resilient consumption. According to the Department of Commerce, the preliminary estimate of U.S. GDP growth for the third quarter was 2.8% annualized compared to the previous quarter. Although this was below the second quarter's 3.0% growth and the Dow Jones forecast of 3.1%, it was evaluated as maintaining solid growth based on strong consumption. This also significantly exceeded the estimated U.S. potential growth rate, which is in the high 1% range.

Ryan Sweet, Chief U.S. Economist at Oxford Economics, said, "This report sends a clear message that the economy is functioning well and inflation is easing," adding, "It's good news for the U.S. Federal Reserve (Fed)."

Employment was also robust. According to the employment report released by U.S. private labor market research firm ADP, private sector job growth in October increased by 233,000. This greatly exceeded both the expert forecast of 110,000 and the previous month's figure of 159,000. It was the largest increase in one year and three months since July last year. This defied market expectations that job growth would slow due to the impact of Hurricanes Hilary and Milton. However, more accurate labor market trends are expected to be confirmed in the U.S. Department of Labor's October employment report to be released on the 1st of next month.

The market expects the Fed to continue its gradual interest rate cut policy regardless of this growth rate announcement. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on this day reflected a 94.6% probability that the Fed will cut rates by 0.25 percentage points in November. The probability of a rate hold was 5.4%.

Major economic indicators will continue to be released this week. On the 31st, the Fed's most important inflation indicator, the September Personal Consumption Expenditures (PCE) price index, and weekly initial jobless claims will be released. On the 1st of next month, the U.S. Department of Labor's October employment report will be published.

Government bond yields are rising. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 1 basis point (1 bp = 0.01 percentage points) from the previous trading day to 4.29%, while the 2-year Treasury yield increased 4 basis points to 4.16%.

International oil prices rose. West Texas Intermediate (WTI) crude oil closed at $68.61 per barrel, up $1.40 (2.1%) from the previous trading day, and Brent crude, the global oil price benchmark, closed at $72.55 per barrel, up $1.43 (2%).