U.S. stock markets faced a significant downturn today, with the Nasdaq experiencing its most considerable decline since early June, largely driven by concerns surrounding artificial intelligence (AI) investments following several notable earnings reports.
The S&P 500 closed well into negative territory, while the tech-heavy Nasdaq dropped 2.6%, primarily impacted by losses in the semiconductor sector after a series of high-profile AI-related earnings announcements. The Dow Jones, however, managed to gain slightly right before the markets closed.
Meta Platforms exceeded analyst expectations with its recent results, yet its stock fell by 7.0%. The parent company of Facebook recorded its first cash outflow in over a decade, attributed to investments in AI, and revealed plans for a non-voting share issuance in a two-for-one split to raise additional funds for these ventures.
Tesla saw a decline of 3.1%, despite reporting an unexpected positive cash flow and reducing its capital expenditure projections for 2026.
The Philadelphia Semiconductor Index, a key contributor to the recent bull market, plunged by 6.7%, marking its steepest one-day drop since late June. Following this decline, the SOX index is now down more than 26% from its record high on June 22 but boasts an impressive 51.5% increase year-to-date. In comparison, the S&P 500 has risen 11.9% during the same timeframe.
Paul Nolte, a senior wealth adviser at Murphy & Sylvest, commented, “It's a wonderful day on Wall Street. The technology sector, once the darling of the markets, seems to be struggling.” He noted that investors are starting to question the sustainability of the AI narrative, which is impacting heavily tech-weighted indices.
On the global front, tensions escalated as Iran-backed Houthis launched attacks on Saudi Arabia, pushing crude oil prices to a five-month peak. This geopolitical instability has led to investor concerns about persistently high inflation, possibly prompting the U.S. Federal Reserve to continue raising interest rates.
Labor Department data indicated that initial unemployment claims remain near multi-decade lows. This underlying stability in the labor market appears to give the Fed the leeway needed to address inflation, with financial markets anticipating a possible 25 basis point hike in the policy interest rate before the end of the year.
In today’s trading, the Dow Jones Industrial Average increased slightly by 11.89 points, or 0.02%, to 52,867.98, while the S&P 500 fell by 93.74 points, or 1.21%, settling at 7,663.43. The Nasdaq Composite lost 694.00 points, or 2.60%, closing at 26,008.86.
As the third-quarter earnings season progresses, 111 companies from the S&P 500 have reported their results, with about 83% surpassing analyst expectations, according to the latest data from LSEG.
Procter & Gamble highlighted the strain of rising costs on profits but managed to exceed forecasts, leading to a 5.6% stock increase, which buoyed the consumer staples sector. Blackstone rose by 8.4% after indicating that widening credit spreads on AI-related debts could yield higher returns. Lockheed Martin's stock climbed 7.0% following an upward revision of its annual sales and profit expectations.
Spotify surged by 11.1% after projecting a stronger-than-expected fourth-quarter profit, crediting its AI-driven features for anticipated user growth. Union Pacific gained 3.6% following an earnings surprise supported by core pricing improvements, despite noting the adverse impact of rising fuel costs.
In the broader semiconductor market, key players like Intel, AMD, SanDisk, and Marvell saw declines exceeding 8%.
On the NYSE, advancing stocks slightly outnumbered declining ones with a ratio of 1.01-to-1. There were 173 new highs and 366 new lows. Meanwhile, on the Nasdaq, 2,022 stocks advanced, while 2,766 decreased, leading to a 1.37-to-1 ratio of declines to advances.
The S&P 500 recorded 40 new 52-week highs alongside four new lows, while the Nasdaq Composite logged 82 new highs and 342 new lows.
Overall trading volume across U.S. exchanges reached 18.79 billion shares, surpassing the 17.19 billion average for the previous 20 trading days.
