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Yesterday (31 October 2024), U.S. markets took a sharp dive, spurred by lackluster tech earnings and mounting investor jitters. Or it could just be a day for booking profits.
What’s Weighing on the Markets?
- Tech Earnings Miss the Mark
- Microsoft: Despite a profit beat, shares slid 6% on a weaker-than-expected outlook for Azure cloud. Investors saw it as a signal that growth in cloud services may be slowing down.
- Meta Platforms: Stock dipped 4.1% following news of higher capital expenses for AI projects. Spending on AI may bolster future growth, but it’s also raising red flags on near-term profitability.
- High Valuations and Lofty Expectations
Tech stocks had been trading at premium valuations, and with earnings falling short of expectations, the correction was swift and unforgiving. - Rising Treasury Yields
Treasury yields crept higher, making stocks relatively less appealing as bonds offer better returns with less risk. - Pre-Election Jitters
With the U.S. election around the corner, concerns about potential policy shifts are stirring up volatility as investors brace for the unknown.
Market Damage at a Glance
- Major Index Losses
- S&P 500 dropped 1.9%, marking its steepest loss in eight weeks.
- Nasdaq Composite shed 2.8%, pulled down by tech giants.
- Dow Jones ticked down 0.9%.
- Sector Standouts
Tech and semiconductors took the hardest hits, with names like Nvidia in the spotlight as selling pressure intensified across the sector.
The Bottom Line: Disappointing tech earnings, bloated valuations, rising yields, and pre-election uncertainty combined forces to deliver a broad-market downturn, with tech bearing the brunt. However, the market has already risen so much since the beginning of this year, so yesterday’s sharp dip should be tolerated. We may need to brace for more volatility ahead as earnings season continues and election day looms.
