The Nasdaq Composite faced a sharp decline on Thursday, leading a downturn in U.S. stocks as earnings reports from Meta (META) and Microsoft (MSFT) raised concerns about the future profitability of major tech companies due to escalating artificial intelligence (AI) costs.
The tech-heavy Nasdaq Composite (^IXIC) dropped 2.7%, while the S&P 500 (^GSPC) fell nearly 1.9%, with both indices closing out the month with slight losses. The Dow Jones Industrial Average (^DJI) also recorded a monthly decline after a 0.9% drop on Thursday.
These monthly losses broke a streak of five consecutive months of gains for the S&P 500 and the Dow. Optimism surrounding a potential boost from Big Tech was dampened as investors processed the quarterly results from Meta and Microsoft. While both companies reported earnings that exceeded Wall Street expectations, they also signaled plans to significantly increase their already substantial spending on AI infrastructure.
These cost concerns contributed to a decline in share prices for both Meta and Microsoft. The negative sentiment extended to other major tech players, including Amazon (AMZN) and Apple (AAPL), which released their earnings reports as part of this week’s “Magnificent Seven” series after the market closed on Thursday. Nvidia (NVDA), often seen as a leader in AI, also saw its stock fall by more than 4.5%.
After hours, Amazon’s stock rebounded as investors responded positively to its earnings, which surpassed Wall Street forecasts for both revenue and earnings per share. Conversely, Apple’s shares dipped slightly, impacted by a one-time charge related to the reversal of a European General Court ruling that affected its earnings per share.
On the macroeconomic front, the latest figures for the Personal Consumption Expenditures (PCE) index aligned closely with expectations, serving as a key inflation metric ahead of the Federal Reserve’s upcoming policy decision next week. In terms of labor market data, initial jobless claims fell to a five-month low of 216,000, surpassing estimates. The focus now shifts to the critical jobs report scheduled for release on Friday.
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