Joey Solitro
Stocks sank at the open and stayed down through Thursday's close, the weight of unmet earnings expectations for several Magnificent 7 stocks dragging the major indexes into the red.
Data showing still-stabilizing inflation and still-healthy employment situations nudged interest rates higher early in the session. Rate-cut odds remain steady, however, a day ahead of the release of the October nonfarm payrolls report.
In today's economic news, the Personal Consumption and Expenditures Price Index (PCE) was up 0.2% in September, according to the Bureau of Economic Analysis, up from 0.1% in September but in line with the consensus forecast.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Core PCE, which excludes food and energy, increased 0.3%. Core PCE is the Federal Reserve's preferred measure of inflation.
The year-over-year increase of 2.1% for headline PCE was the lowest reading since February 2021 and was down from 2.3% in August. Core PCE, meanwhile, was steady at 2.7% on an annual basis.
The yield on the 10-year Treasury note ticked up nearly seven basis points intraday to 4.33% before settling basically flat at 4.28%, though the key benchmark is up nearly a full percentage point, or 100 basis points, in about a month.
The fed funds futures market continues to reflect a greater than 90% probability the central bank will cut its benchmark interest rate by a quarter-percentage point during next week's Federal Open Market Committee meeting.
Employment and inflation
Complementing the PCE data, initial jobless claims came in at a seasonally adjusted 216,000 for the week ended October 26, a decline of 12,000 from the previous week's revised level, according to the Department of Labor.
"The big picture is that inflation continues to head lower, albeit with some bumps (like in September)," says Sonu Varghese, global macro strategist at Carson Group. "This report is unlikely to change the expectation of the Fed cutting rates by 25 basis points at their November meeting, but the December decision may be up in the air depending on upcoming payroll and inflation data."
The Bureau of Labor Statistics (BLS) will release its employment situation summary for October on Friday at 8:30 am Eastern time. A consensus compiled by FactSet forecast nonfarm payroll growth of 120,000, down from 254,000 in September.
The BLS said worker strikes at companies such as Boeing (BA) will reduce the nonfarm payroll number by 41,000. The impact of recent hurricanes in Florida and North Carolina is yet to be quantified.
Economists expect the unemployment rate to be steady at 4.1%.
The S&P 500 shed 1.9% to end October at 5,705. The Dow Jones Industrial Average was down 0.9% to close the month at 41,763. The Nasdaq Composite lost 2.8% this Halloween to 18,095.
And that's all about the gravity of the Magnificent 7. It's just math: Their collective appreciation means they make up big chunks in capitalization-weighted indexes, and when they move those indexes will move with them.
The Magnificent 7 report
Indeed, pre-market trading indicated today's gap-down open, as two Mag 7 bellwethers posted solid operating and financial numbers after Wednesday's closing bell but failed to meet Wall Street's beat-and-raise cadence this time around.
Big Tech capital expenditure budgets continue to expand, though investors and analysts alike keep hoping for improving returns on their significant investments in artificial intelligence (AI).
Meta Platforms (META) stock declined 4.1% even after the Facebook, Instagram and WhatsApp parent beat top- and bottom-line estimates for its third quarter.
User-growth numbers failed to meet forecasts, and Meta's capex budget was up 36% during the third quarter to $9.2 billion. Management said in a statement that it expects a “significant acceleration” in capex spending in 2025.
Like META, Microsoft (MSFT) stock fell 6.1% after the technology giant beat top- and bottom-line expectations for its fiscal 2025 first quarter but issued guidance that came up short.
Management forecast Azure revenue growth of 31% to 32% versus expectations of 32.25%. Azure revenue was up 33% during the fiscal first quarter. Microsoft's capex spending for the third quarter was up 5% to $20 billion.
With results from META and MSFT as well as Tesla (TSLA) and Alphabet (GOOGL) in the books, Amazon.com (AMZN) and Apple (AAPL) are in the earnings calendar spotlight after tonight's close.
Nvidia (NVDA) will be the last of the Mag 7 to report, on November 20.
Carvana soars after earnings, Uber slumps
Carvana (CVNA) stock surged 19.3% after the online used car retailer delivered a top- and bottom-line beat for its third quarter and issued a strong outlook for the fourth quarter.
"The third quarter was another exceptional quarter for Carvana. We had record performance in virtually every key financial measure," said Carvana CEO Ernie Garcia in a statement.
"Most importantly, our customer experiences, our financial performance, and our pace of growth continue to separate us further from the pack in our industry. Today, we are the most profitable and fastest-growing automotive retailer and there is still much more to do."
One analyst sees a lot more upside from here for CVNA.
Uber Technologies (UBER) stock slid 9.3% after the ride-hailing company beat top- and bottom-line expectations for its third quarter but came up just short of gross bookings expectations.
In keeping with the day's theme, Uber also issued guidance for the fourth quarter that was just below expectations.
Related content
- 6 Cybersecurity Stocks to Buy Now
- Why Reddit Stock's an Even Bigger Buy After Earnings
- Advanced Micro Devices Stock Sinks as Q4 Guidance Disappoints. What to Know
-
I’m Over 65 and Itemize: Can I Claim the New $6,000 ‘Senior Bonus’ Tax Deduction?Tax Changes If you’re an older adult, a new bonus deduction could provide a valuable tax benefit.
-
Alphabet Stock Pops After Google Antitrust Ruling: What to KnowGOOGL stock is soaring Wednesday after a judge ruled that Alphabet does not have to divest its Chrome browser.
-
Alphabet Stock Pops After Google Antitrust Ruling: What to Know
GOOGL stock is soaring Wednesday after a judge ruled that Alphabet does not have to divest its Chrome browser.
-
7 Mistakes to Avoid When You First Start InvestingInvesting brings the opportunity to build wealth, but there are plenty of mistakes that can be made. Here are seven common ones and how they can be avoided.
-
A Fidelity Fund Misses Out on Soaring Bank StocksThe Fidelity International Growth Fund has outperformed over the long term, but its lagging exposure to bank stocks has weighed on more recent returns.
-
More Than Money: The Hidden Toll of Financial Abuse of Older AdultsFinancial abuse from schemes involving tech support, government impostors, false sweepstakes, grandchild hoaxes and online shopping issues can cause thousands of dollars in losses.
-
I'm a Financial Planner: Here Are Three High-Impact Ways to Make a Difference With Your DollarsThe world often feels out of control, but here are three ways to use your money — through investments, charitable giving and political donations — to help create a more just and sustainable future.
-
Stocks Slide to Start September: Stock Market TodaySeasonal trends suggest tough times for the stock market as we round into the end of the third quarter.
-
If You'd Put $1,000 Into Sherwin-Williams Stock 20 Years Ago, Here's What You'd Have TodaySherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
Where is the Foreign Dividend Boom Headed?It's been a golden six months for foreign dividend stocks, but can any be relied on for predictable income going forward? Here are some options.
