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US stocks fell on Thursday as investors reassessed heavy artificial intelligence spending by major technology companies. They also weighed corporate earnings, inflation data and the Federal Reserve’s latest policy decision.
All three major US stock indexes ended in negative territory. The Nasdaq suffered the biggest decline as technology giants came under pressure. The sell-off followed disappointing quarterly results from Alphabet, released late Wednesday.
However, the small-cap Russell 2000 moved higher. The index gained 0.8 per cent.
Semiconductor stocks also faced losses. The sector fell 2.0 per cent and looked set to end its four-day winning streak.
Investors are now examining which companies can finance their ambitious AI plans. They are also watching firms that rely heavily on borrowing or spend large amounts of cash.
Alphabet came under pressure after its latest quarterly report. The Google parent missed revenue expectations and reported faster spending on AI projects.
Its shares dropped 13.2 per cent.
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Ross Mayfield, an investment strategy analyst at Baird in Louisville, Kentucky, said the market weakness did not affect every sector.
He noted that small-cap stocks outperformed during the session. He said investors could still find opportunities outside the AI sector.
“There’s plenty of other places to go with your money outside of the AI trade that have pretty decent prospects,” Mayfield said.
The Federal Reserve kept US interest rates unchanged on Wednesday. Policymakers acknowledged that price pressures remained “elevated”.
The central bank said it would assess further economic information before making its next policy decision.
Economic data released on Thursday offered fresh insight. The first estimate of third-quarter GDP showed faster-than-expected growth in the US economy.
However, inflation pressures also increased. A war-related oil supply crunch added to broader price pressures.
All three major indexes recorded losses.
The Dow Jones Industrial Average fell 315.36 points, or 0.59 per cent, to 52,163.07.
The S&P 500 dropped 48.73 points, or 0.63 per cent, to 7,695.25. Meanwhile, the Nasdaq Composite lost 441.15 points, or 1.66 per cent, to close at 26,108.35.
Among the S&P 500’s 11 major sectors, communication services and technology suffered the biggest declines. Healthcare led the gainers.
The third-quarter earnings season has passed its halfway point. A total of 253 S&P 500 companies have reported their results.
According to the latest LSEG data, 81 per cent of those companies beat analysts’ expectations. Analysts now expect overall third-quarter S&P 500 earnings to grow 31.0 per cent year-on-year.
Caterpillar reported quarterly profits above estimates. However, the heavy equipment maker kept its growth targets unchanged. Its shares fell 9.5 per cent.
Eli Lilly gained 6.3 per cent after raising its revenue outlook. Strong sales of its weight-loss drugs supported the improved forecast.
Ford shares rose 2.9 per cent after the automaker reported better-than-expected third-quarter revenue.
Merck also advanced. Its shares gained 4.4 per cent after the drugmaker beat earnings expectations. Strong performance from cancer drug Keytruda and HPV vaccine Gardasil supported the results.
Software stocks faced broad selling pressure. Fortinet and ServiceNow each fell more than 20 per cent following their quarterly reports.
Marvell Technology dropped 12.8 per cent. Media reports said the company was in advanced talks to acquire data-centre optics maker Lumentum Holdings.
Lumentum shares moved in the opposite direction, rising 2.0 per cent.
Amazon fell 3.9 per cent ahead of its earnings report. The company was expected to release its results after the closing bell.
On the New York Stock Exchange, advancing shares outnumbered declining shares by 1.59 to 1. The exchange recorded 113 new highs and 155 new lows.
On the Nasdaq, 2,416 stocks advanced while 2,221 declined. Advancing shares outnumbered decliners by 1.09 to 1.
The S&P 500 recorded 19 new 52-week highs and six new lows. The Nasdaq Composite posted 81 new highs and 131 new lows.
