[New York Stock Market] Big Tech AI Spending Concerns and U.S.-China 'Temporary Truce' Outlook Drag Stocks Lower... Powell's Comments Add Pressure

Meta and Microsoft Drop on Increased Capital Expenditures
Relief Over U.S.-China Trade Agreement Mixed With Concerns of a Temporary Truce
Powell's "Too Soon to Assume December Rate Cut" Remarks Also Weigh on Sentiment

All three major U.S. stock indexes closed lower on October 30 (local time). Caution over increased artificial intelligence (AI) spending by big tech companies and the U.S. Federal Reserve’s hawkish approach to rate cuts dampened investor sentiment. While the market found some relief as the United States and China eased trade tensions through a summit, concerns that this would amount to only a "temporary truce" also weighed on sentiment.

New York Stock Exchange (NYSE). Photo by Reuters Yonhap News

On this day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average ended down 109.88 points (0.23%) at 47,522.12. The S&P 500, which focuses on large-cap stocks, dropped 68.25 points (0.99%) to close at 6,822.34, while the tech-heavy Nasdaq plunged 377.329 points (1.58%) to finish at 23,581.144.

By stock, Meta, the parent company of Facebook, and Microsoft both slipped 11.33% and 2.9%, respectively, despite strong earnings the previous day. Investor concerns over increased AI-related capital expenditures by both companies led to selling pressure. Nvidia, which became the world’s first listed company to surpass a $5 trillion market capitalization the previous day, also fell 2.04%. In contrast, Alphabet, Google’s parent company, rose 2.45% thanks to robust earnings. Apple, which was set to announce its earnings after the market closed, gained 0.63%, while Amazon declined 3.23%.

Among major U.S. banks, JP Morgan rose 1.29%, and Bank of America gained 0.86%. U.S. pharmaceutical company Eli Lilly also jumped 3.81% after reporting better-than-expected results.

Jed Ellerbroek, portfolio manager at Argent Capital, said in an interview with CNBC, "Today is a day for value investing," adding, "Given that tech stocks have led the market recently, this kind of movement by investors is natural and healthy." He analyzed the situation as a short-term correction driven by profit-taking from surging tech stocks and sector rotation.

Matt Maley, chief market strategist at Miller Tabak, commented, "This does not mean the AI bubble is bursting or that a major reversal in the stock market is imminent," but diagnosed that "it does, however, increase the likelihood of a short-term correction in the near future."

Hawkish remarks by Federal Reserve Chair Jerome Powell the previous day also weighed on investor sentiment. The Fed, at the previous day’s Federal Open Market Committee (FOMC) regular meeting, cut its benchmark interest rate by 0.25 percentage points to a range of 3.75-4.0%, marking a second consecutive rate cut. However, Powell poured cold water on market expectations during a press conference, saying, "We should not take a December rate cut as a given." Furthermore, among the 12 FOMC members with voting rights on the rate decision, two cast dissenting votes, with one supporting a 0.5 percentage point cut and the other favoring a hold, highlighting growing internal disagreements over monetary policy and uncertainty about the future path of interest rates.

The market also paid close attention to the outcome of the U.S.-China summit. On October 30 (Korea Standard Time), U.S. President Donald Trump held talks with Chinese President Xi Jinping at Gimhae Air Base in Busan, announcing that the tariff on all Chinese imports of fentanyl would be reduced from the existing 20% to 10%. In addition, China agreed to suspend rare earth export controls for one year and resume imports of U.S. soybeans. While investors were relieved that the two countries avoided further escalation, there remained caution in the market that this was merely a "temporary truce" and did not resolve the fundamental issue of trade imbalances.

Ellerbroek commented, "It’s not over yet," and predicted, "As long as President Trump remains in office, trade-related volatility will continue to be a defining feature of our capital markets."

U.S. Treasury yields have edged up as expectations for additional rate cuts within the year have diminished. The yield on the 10-year U.S. Treasury note, the global benchmark for bond yields, rose 3 basis points (1bp = 0.01 percentage points) from the previous day to 4.09%, while the yield on the 2-year Treasury, which is sensitive to monetary policy, rose 2 basis points to around 3.60%.