Stocks Slide as Meta, Microsoft Caution on AI Costs and Dollar Weakens Post U.S. Data
World markets faced a significant dip on Thursday, spurred by two major players—Meta and Microsoft—both cautioning about the escalating costs associated with artificial intelligence. The impact was instant, with the Nasdaq dropping over 2%, and both Meta and Microsoft shares seeing notable declines. As Wall Street kept a close eye on earnings, the dollar also eased slightly against other currencies, leaving investors questioning what’s next.
Let’s break down this turbulent market moment and explore the key factors influencing these shifts.
What Triggered the Latest Market Drop?
1. Rising AI Costs and Concerns Over Pay-Off Timelines
Both Meta and Microsoft warned about rising expenses tied to their AI advancements. Meta’s stock slid by 3.2%, while Microsoft saw a sharper decline of 5.6%. With significant investments in artificial intelligence, the companies’ cautious outlook on the return on investment (ROI) timeline has investors wondering when they will actually see meaningful profits.
This hints at broader market concerns:
- AI costs are mounting, making investors question how sustainable these investments are in the short term.
- Meta and Microsoft’s substantial influence means their performance affects the broader Nasdaq and S&P 500 indices.
2. Waiting on Amazon and Apple’s Earnings
Thursday wasn’t just about Meta and Microsoft. All eyes are on Amazon and Apple, with their earnings reports scheduled to release shortly. The anticipation has put the tech market under a microscope, with investors hoping that these reports might help stabilize market performance or add clarity to what’s next for tech in the AI-heavy landscape.
3. U.S. Consumer Spending Data on the Rise
Alongside corporate reports, U.S. consumer spending data revealed a slight increase for September, hinting at a stronger economy heading into Q4. This data didn’t radically change Federal Reserve (Fed) expectations, but it confirmed that the economy remains resilient. However, spending has leaned more towards non-discretionary categories like:
- Healthcare and prescription drugs
- Housing and utilities
This shift reflects economic pressures pushing consumers to prioritise essentials over luxuries.
Dollar Eases Against Yen and Euro Amid Fed Speculations
As investors assessed the Fed’s next moves, the dollar softened slightly:
- The Bank of Japan adopted a less dovish tone, resulting in a 0.53% dip in the dollar against the yen.
- Meanwhile, a rise in the euro indicated European inflationary concerns, with hints at a cautious European Central Bank stance on interest rate cuts.
In the currency market:
- Dollar index was flat, hovering around 104.13.
- The euro gained slightly, touching $1.0866.
- Against the yen, the dollar traded lower at 152.59.
Insights on Wall Street Performance
U.S. markets displayed notable declines on Thursday:
- Dow Jones: Fell by 362.70 points (0.86%) to 41,778.84.
- S&P 500: Dropped 84.93 points (1.46%) to 5,728.74.
- Nasdaq Composite: Slid 425.71 points (2.29%) to 18,182.22.
The decline also reflected cautious investor sentiment heading into November, with global factors like currency fluctuations, rising interest rates, and consumer spending trends all contributing to Wall Street’s outlook.
Global Markets Feel the Pressure: Europe’s STOXX 600 Hits Seven-Week Low
Europe’s STOXX 600 took a hard hit, dipping by 1.5% to reach its lowest point in seven weeks. Earnings reports and broader economic uncertainty contributed to the drop, highlighting how global interconnectedness amplifies the influence of tech giants like Meta and Microsoft on international markets.
Key drivers:
- Earnings season reveals potential vulnerabilities across sectors.
- European markets mirror the cautious tone observed in U.S. indices.
Treasury Yields and Cryptocurrency Adjustments
In the U.S., Treasury yields edged up post-consumer spending data. Benchmark 10-year yields rose 4.4 basis points, nearing a four-month high at 4.309%. Higher yields suggest that the bond market anticipates continued economic resilience, even if the Fed opts to keep interest rates steady in the short term.
Meanwhile, cryptocurrencies also saw declines:
- Bitcoin fell 3.02% to $70,640.00.
- Ethereum dipped 4.98% to $2,545.70.
Commodities Check: Gold and Oil Prices in Focus
Gold prices experienced a temporary pullback after reaching record highs. Spot gold slipped by 0.7% to $2,766.59 per ounce but is still up roughly 5% for October, indicating its ongoing appeal as a safe-haven asset amid economic uncertainty.
Oil prices rose:
- U.S. crude increased by 1.33% to $69.52 per barrel.
- Brent crude climbed 0.94% to $73.23 per barrel.
The Road Ahead: What Are Investors Watching?
Looking forward, investors will be closely watching:
- Amazon and Apple earnings results
- Friday’s U.S. jobs report for October
- The U.S. presidential election outcome
These factors will drive market sentiment and shape investment decisions as the tech-heavy Nasdaq seeks to regain stability and broader markets adapt to ongoing economic shifts.
Conclusion
Thursday’s trading highlighted the delicate balance in today’s markets, where every corporate decision and economic indicator influences global investment strategies. With Meta and Microsoft sounding cautionary notes about AI costs, the tech sector faces immediate challenges as it works towards long-term ROI. This volatility reflects broader economic questions, with currency shifts, Treasury yields, and commodities prices all adjusting in real-time to the latest financial data.
In this high-stakes environment, staying informed and agile is key to navigating the changes and finding opportunities amid the turbulence. Whether watching the U.S. dollar’s moves or tracking AI’s ROI potential, it’s clear that adaptability is more crucial than ever.
Learn More:
- Meta [https://www.meta.com]
- Microsoft [https://www.microsoft.com]
- Nasdaq [https://www.nasdaq.com]
- Treasury yields [https://www.federalreserve.gov/releases/h15/]
- Bitcoin [https://www.coindesk.com/price/bitcoin]
