Alphabet shares plummeted 11.6% on Thursday following a disappointing quarter, contributing to a broader decline in U. S. stock markets. The Nasdaq Composite fell 1.38% to 26,184.72, while the S&P 500 slipped 0.3% to 7,720.39, ending a three-day winning streak. The Dow Jones Industrial Average also dropped 132.54 points, or 0.25%, closing at 52,342.56.
Alphabet's earnings miss was marked by adjusted earnings per share and revenue falling short of expectations, alongside a negative free cash flow of $9.07 billion. Despite this, the company maintained its full-year capital expenditures forecast between $195 billion and $205 billion. Meanwhile, Caterpillar experienced its worst trading day since March 2020, with shares dropping over 9%. Although the industrial giant reported better-than-expected revenue and earnings, its construction industries business sales fell slightly below estimates.
Microsoft also saw its shares decline, reversing earlier gains. The tech giant initially benefited from growth in its Azure cloud infrastructure business, which helped it surpass analyst expectations for earnings and revenue in its fiscal first quarter. However, concerns over lower-than-expected capital spending commitments led to a pullback, affecting related stocks like CoreWeave and Nebius, which fell about 5% each.
The tech sector faced additional pressure as AI-related stocks continued to struggle. The iShares Semiconductor ETF (SOXX) and the Roundhill Memory ETF (DRAM) both saw declines, with SOXX down more than 1% and DRAM falling over 4%. Despite recent challenges, Art Hogan, chief market strategist at B. Riley Wealth Management, noted a more stable environment for tech stocks compared to previous months, though he emphasized increased selectivity among investors.
In monetary policy news, the Federal Reserve opted to keep interest rates steady, maintaining the benchmark rate between 3.75% and 4%. This decision followed a quarter-percentage point increase in September. Fed officials acknowledged that inflation remains elevated but indicated they are waiting for more data before making further adjustments. The personal consumption expenditures price index showed a monthly increase in line with expectations, although the annual rate was slightly below Wall Street estimates.
Among the S&P 500 sectors, real estate and healthcare led gains, rising 2.1% and 1.9% respectively. Consumer staples, financials, and utilities also posted gains of over 1%. However, communication services and information technology dragged the index down, with declines of more than 6% and 1% respectively.
Elsewhere, Eli Lilly shares rose after the company reported strong third-quarter results and raised its full-year guidance. The company cited broad global consumer demand and expanded U. S. coverage for obesity care as key factors in its performance.
The small-cap Russell 2000 index rose 1%, marking its third consecutive positive session and a 5% rebound from its mid-October slump. In contrast, the tech-heavy Nasdaq continued to face challenges, with shares of Amazon falling more than 2% ahead of its third-quarter earnings report.
In economic news, the U. S. economy grew by 3.4% in the third quarter, surpassing the Dow Jones consensus estimate of 3.1%. This growth came amid accelerating inflation, with the personal consumption expenditures price index rising 0.5% in September, resulting in an annual inflation rate of 3.6%.
Premarket trading saw Chipotle Mexican Grill shares advance 7.6% after reporting mixed quarterly results. While the fast-food chain's revenue was in line with expectations, earnings per share slightly missed estimates. Nonetheless, Chipotle reported same-store sales growth for the third consecutive quarter and plans to open 340 to 360 new company-owned locations by 2027.
