[New York Stock Market] Broad Decline Led by MS and Meta Big Tech Slump... Nasdaq Down 2.76%

MS and Meta Disappoint Despite Expected Premium Earnings
MS Faces Revenue Outlook Disappointment... Meta Concerns Over Capital Expenditure
September PCE Inflation Up 2.1% YoY
Focus on October Employment Report

The three major indices of the U.S. New York Stock Exchange all closed lower on the 31st (local time). This was due to a decline in investor sentiment following disappointing earnings reports from Microsoft (MS) and Meta, the parent company of Facebook, which led to a sharp drop in tech stocks. Inflation indicators, which the U.S. Federal Reserve (Fed) closely monitors, are approaching the target rate of 2%, suggesting a continued gradual interest rate cut policy.

On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 41,763.46, down 378.08 points (0.9%) from the previous trading day. The large-cap-focused S&P 500 index fell 108.22 points (1.86%) to 5,705.45, and the tech-heavy Nasdaq index plunged 512.78 points (2.76%) to close at 18,095.15.

By individual stocks, tech shares showed weakness. MS fell 6.05%. Despite posting quarterly earnings that exceeded market expectations the previous day, the sales forecast for the October-December quarter fell short of Wall Street estimates, accelerating the sell-off. The growth rate of Azure, its cloud service revenue, was also expected to slow compared to the previous quarter. Meta also dropped 4.09%. Although its quarterly earnings exceeded market expectations, the number of Facebook users in Q3 fell short of forecasts, and increased capital expenditures next year weighed on the stock price. AI leader Nvidia fell 4.72%, and AMD declined 3.06%. Super Micro Computer, embroiled in accounting fraud allegations, plunged 11.97%.

Ross Mayfield, investment strategist at Baird Private Wealth Management, pointed out, "We have reached a point where enthusiasm and potential for AI alone are not enough," adding, "Companies are supported by the AI theme and expected to have favorable long-term growth, but they are not delivering growth sufficient to justify the valuations reflected in their stock prices."

The market focused on big tech companies such as Apple and Amazon, which were scheduled to report earnings that day. Amazon announced after the market close that its Q3 revenue reached $158.88 billion, with earnings per share (EPS) of $1.43. This exceeded the market research firm LSEG's forecast ($157.2 billion revenue and $1.14 EPS). Amazon's stock fell 3.39% during regular trading but jumped 3.97% in after-hours trading following the better-than-expected earnings report.

Inflation data was released that morning. According to the U.S. Department of Commerce, the Personal Consumption Expenditures (PCE) price index for September rose 2.1% year-over-year, matching market expectations (2.1%). The core PCE price index, which excludes volatile energy and food prices and reflects the underlying inflation trend, rose 2.7% year-over-year, slightly exceeding the forecast of 2.6%. With inflation aligning with the Fed's target, the market expects a continued gradual interest rate cut policy. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market reflected a 96.7% probability that the Fed will cut rates by 0.25 percentage points at the November Federal Open Market Committee (FOMC) meeting. The probability of a rate hold was 3.3%.

Jamie Cox, managing director at Harris Financial Group, analyzed, "Investors want to see a scenario where growth rises and inflation falls," adding, "As long as disinflation continues in this cycle, the Fed does not need to fear a steadily growing economy when cutting rates."

Employment was also confirmed to be solid. The U.S. Department of Labor reported that initial jobless claims for the week of October 20-26 fell by 12,000 to 216,000, the lowest level since May. This was 13,000 below the expert forecast of 229,000. Continuing claims, which count those claiming unemployment benefits for at least two weeks, stood at 1,862,000 for the week of October 13-19, below the revised previous week's 1,888,000 and the market forecast of 1,890,000. The labor market appears to be recovering from the impacts of Hurricanes Hilary and Milton. More accurate employment trends are expected to be confirmed in the U.S. Department of Labor's October employment report, to be released the following day.

Government bond yields showed a slight upward trend. The U.S. 10-year Treasury yield, a global benchmark for bond yields, rose 2 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.28%. The 2-year Treasury yield increased 1bp to 4.16%.

International oil prices rose. West Texas Intermediate (WTI) crude oil closed at $69.26 per barrel, up $0.65 (1.0%) from the previous day, while Brent crude, the global benchmark, rose $0.61 (0.8%) to close at $73.16 per barrel.