NEW YORK (AP) — Wall Street is feeling the downside of high expectations on Thursday, as Microsoft and Meta Platforms help drag U.S. stock indexes lower despite delivering strong profits for the summer.
The S&P 500 was down 1.2% in morning trading and falling further from its record set earlier this month. The Dow Jones Industrial Average was down 264 points, or 0.6%, as of 10:15 a.m. Eastern time, while the Nasdaq composite was 1.9% lower and on track for a second straight loss after setting its latest all-time high.
Microsoft reported bigger profit growth for the latest quarter than analysts expected. Its revenue also topped forecasts, but its stock nevertheless sank 5.3% as investors and analysts scrutinized for possible disappointments. Many centered on Microsoft’s forecast for upcoming growth in its Azure cloud-computing business, which fell short of some analysts’ expectations.
The parent company of Facebook, meanwhile, likewise served up a better-than-expected profit report. For it, investors focused on Meta Platforms’ warning that it expects a “significant acceleration” in spending next year as it continues to pour money into developing artificial intelligence. It fell 2.9%.
Both Microsoft and Meta Platforms have soared in recent years, in large part on excitement around AI, and are entrenched among Wall Street’s most influential stocks. But such stellar performances have critics saying their stock prices have simply climbed too fast, leaving them too expensive. It’s difficult to meet everyone’s expectations when they’re so high, and Microsoft and Meta were both among Thursday’s heaviest weight on the S&P 500.
The next two companies in the highly influential group of stocks known as the "Magnificent Seven" to deliver their latest results are Apple and Amazon. They're set to report after trading ends for the day, and both fell at least 0.9% on Thursday.
Earlier this month, Tesla and Alphabet kicked off the Magnificent Seven's reports with results that investors found impressive enough to reward with higher stock prices.
The tumble for Big Tech on the last day of October is helping to wipe out the S&P 500’s gain for the month. The index is down 0.3% and on track for its first down month in the last six, even though it set an all-time high during the middle of it.
Still, the losses outside of Big Tech were not as severe, and nearly as many stocks were rising in the S&P 500 Thursday as falling. Cruise ships and cigarettes helped lead the way.
Norwegian Cruise Line Holding steamed 8.2% higher after delivering stronger profit for the latest quarter than analysts expected. The cruise ship operator said it was seeing strong demand from customers across its brands and itineraries, and it raised its profit forecast for the full year of 2024.
Altria Group rose 6.9% for another one of the S&P 500’s bigger gains after it also beat analysts’ profit expectations. Chief Executive Billy Gifford credited resilience for its Marlboro brand, among other things, and announced a cost-cutting program.
In the bond market, Treasury yields continued their climb following a mixed set of reports on the U.S. economy.
One report said a measure of inflation that the Federal Reserve likes to use slowed to 2.1% in September from 2.3%. That's almost all the way back to the Fed's 2% target, though underlying trends after ignoring food and energy costs were a touch hotter than economists expected.
A separate report said growth in workers' wages and benefits slowed during the summer. That could put less pressure on upcoming inflation. A third report, meanwhile, said fewer U.S. workers applied for unemployment benefits last week. That's an indication that the number of layoffs remains relatively low across the country.
Treasury yields swiveled up and down several times following the reports before rising. The yield on the 10-year Treasury edged up to 4.31% from 4.30% late Wednesday. That’s up sharply from the roughly 3.60% level it was at in the middle of last month.
Yields have been rallying following a string of stronger-than-expected reports on the U.S. economy. Such data have bolstered hopes that the economy can avoid a recession, particularly now that the Fed is cutting interest rates to support the job market instead of keeping them high to quash high inflation. But the resilient economy also is forcing traders to curtail their expectations for how deeply the Fed will ultimately cut.
In stock markets abroad, indexes were lower across much of Europe and Asia.
South Korea's Kospi dropped 1.5% after North Korea test launched a new intercontinental ballistic missile designed to be able to hit the U.S. mainland in a move that was likely meant to grab America's attention ahead of Election Day.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.