The Nasdaq Composite took a significant hit on Friday, slumping 2.5%. Investors veered away from technology stocks after major companies like Amazon and Intel released earnings reports that failed to meet expectations. Meanwhile, the Dow Jones Industrial Average lost 352 points, or 0.7%, and the S&P 500 slid by 1.5%.
Amazon's stock dipped 2% as its third-quarter earnings and revenue fell short of what Wall Street had anticipated. The tech giant also reported a negative free cash flow amounting to $42.4 billion and stuck to its capital expenditure forecast of $220 billion through 2026. Intel saw a significant drop, with its stock affected by a weak outlook for the current quarter. Revenue from its client computing and physical artificial intelligence group fell by 5% year-over-year, totaling $8.1 billion.
Other tech firms weren't spared from the downturn. Sandisk's shares tumbled 10%, even though it exceeded fiscal first-quarter estimates. The company announced an eight-for-one forward stock split, which didn't help its stock price. Chipmakers like Advanced Micro Devices, Nvidia, and Broadcom also suffered declines of 10%, 3%, and 5%, respectively.
As technology stocks faltered, investors turned their attention to defensive sectors such as consumer staples and healthcare. Procter & Gamble, Walmart, and Coca-Cola each saw nearly 2% gains, giving a boost to Dow futures. Merck and Amgen, both part of the Dow, added about 1%.
JPMorgan traders observed that concerns over AI monetization have reignited, suggesting that the equity rotation away from tech is likely to continue, affecting broader indices due to tech's downward movement. Alphabet's shares had their worst day on record on Thursday after missing third-quarter earnings and revenue expectations, resulting in a negative free cash flow of $9.07 billion. This contributed to the Nasdaq's loss of more than 1% during the regular session.
Friday was the last trading day of October, a month marked by volatility in the AI sector. Investors kept a close watch on companies' spending on AI infrastructure. Hyperscalers like Alphabet and Microsoft did not raise their capital expenditure forecasts. Neocloud companies, crucial for AI datacenters, faced scrutiny over their debt levels. CoreWeave's bond yields surged, causing a 36% drop in its shares for October, while Nebius experienced a 33% decline.
The Roundhill Memory ETF (DRAM), which includes AI memory companies like Micron and Seagate Technology, fell 19% in October. The iShares A. I. Innovation and Tech Active ETF (BAI) dropped 16%. As the month wrapped up, the Nasdaq Composite was on track for a nearly 5% fall, the S&P 500 for a 0.6% decline, and the Dow for a more than 2% rise.
Defensive sectors continued to perform well on Friday. State Street's Consumer Staples Select Sector ETF (XLP) gained nearly 2%, reaching a new intraday all-time high of $90. Tobacco product company Altria Group's shares rose over 2%, hitting a 52-week high of $79. Philip Morris and Keurig Dr. Pepper also reached 52-week highs, with increases of 1.6% and 1.4%, respectively.
State Street's Health Care Select Sector ETF (XLV) climbed 1.5%, reaching a 52-week high of $187. Top holdings like Eli Lilly, Johnson & Johnson, Pfizer, and Gilead all saw gains, with each stock reaching 52-week highs. Regeneron Pharmaceuticals stood out, with its stock soaring more than 12% following a strong third-quarter report.
The major averages started Friday's session in negative territory, with the Nasdaq Composite down 2.2%, the Dow Jones Industrial Average shedding 155 points, or 0.3%, and the S&P 500 losing 1.2%.
The 2-year Treasury note yield fell below the 50-day moving average of 4.609% on Friday, marking the first time it closed below this level since August 18.
