Jamie Spencer
On Thursday, the Dow Jones Industrial Average tumbled over 250 points in morning trading, joining steep declines in the Nasdaq and S&P 500. The downturn followed disappointing earnings reports from major tech players Microsoft and Meta, both of which face challenges in meeting the rapid demand for artificial intelligence (AI) capabilities. Investors are now turning their attention to after-market earnings reports from Apple and Amazon, hoping for positive results to lift market sentiment.
Tech Giants Drag Down Markets Amid AI Challenges
Microsoft and Meta led the tech sector’s losses, with Microsoft shares falling over 5% and Meta dropping about 3%. Both companies are navigating the AI boom, but the intense demand for AI services has brought operational challenges. Investors were particularly rattled by Microsoft’s AI-driven cloud revenue growth, which came in below expectations. Meta’s challenges in the evolving social media landscape further contributed to market jitters, pulling the tech-heavy Nasdaq down 421 points, or 2.2%, by the afternoon.
The day’s decline wasn’t limited to Microsoft and Meta. Super Micro Computer faced a nearly 13% drop following the resignation of its auditor, Ernst & Young, and now faces potential delisting from the Nasdaq. Shares of crypto-aligned companies like Coinbase, MicroStrategy, and Robinhood also took hits following their own earnings releases, adding to the sector-wide pressure.
Economic Bright Spots: Labor Market and Inflation Easing
Amid the market volatility, there were some positive economic signals. Initial U.S. unemployment claims fell to a five-month low, dropping by 12,000 to 216,000 for the week ending Oct. 26. This decline surpassed expectations and suggested resilience in the labor market. Additionally, inflation showed further signs of cooling. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose by just 2.1% year-over-year in September, down from 2.3% in August and inching closer to the Fed’s 2% target. This slowdown in inflation is a positive sign for consumers and the Fed as it aims to ease interest rates.
What to Expect from Apple Earnings
Apple will report its fourth-quarter earnings Thursday, with analysts projecting earnings per share of $1.60 and net income of $24.24 billion, representing over 5% growth year-over-year. The report will also provide the first insights into sales since the launch of Apple’s latest iPhones and new AI-driven features, collectively known as Apple Intelligence. Apple’s stock has risen by about 25% year-to-date, outpacing the S&P 500, and analysts are optimistic that the tech giant will deliver a strong quarter.
What to Expect from Amazon Earnings
Amazon’s third-quarter report is also due after the market close, with revenue estimates set at $157.3 billion and earnings per share expected at $1.14. In the previous quarter, Amazon slightly missed revenue expectations but posted a net income of $13.5 billion, above projections. Amazon Web Services (AWS), the company’s cloud division, saw robust growth last quarter, with revenues rising 19% year-over-year. As Amazon continues to expand its cloud and retail operations, investors are eager to see if it meets revenue guidance set between $154 billion and $158.5 billion.
Thursday’s market decline highlights the sensitivity of the tech sector to earnings reports, especially amid rising competition and evolving AI demands. Investors will be closely watching Apple and Amazon’s reports for signals of stability and growth in tech and retail, respectively. With inflation cooling and the labor market holding steady, these earnings could offer crucial insights into the near-term outlook for the broader market.
