Market Volatility: S&P 500 and Nasdaq Experience Decline Amid Earnings Reports
The S&P 500 and the technology-centric Nasdaq witnessed a downturn on Thursday, as investors displayed disquiet over recent earnings disclosures and the prospects of significant investments in artificial intelligence yielding returns for colossal tech firms.
Although both indexes made modest recoveries by the session’s conclusion, they remained burdened by a lethargic technology sector.
Microsoft emerged as the principal detractor for the S&P 500, with its shares plummeting 10% following uninspiring cloud revenue figures, igniting apprehensions about the swift financial returns from its substantial alliance with OpenAI.
Other software entities faced similar fates; for instance, SAP’s U.S.-listed shares plummeted 15%, hindered by a cautious outlook for its cloud division, while ServiceNow’s shares declined 9.9% subsequent to an earnings report that compounded the prevailing pessimism.
“Microsoft’s performance has raised tangible concerns regarding the sustainability of AI investments for software firms,” remarked John Praveen, Managing Director and Co-CIO at Paleo Leon in Princeton, New Jersey.
According to Praveen, investors are increasingly inclined to “reduce exposure to stocks and adopt a more cautious stance” amidst a backdrop laden with uncertainties, including questions surrounding the future chairperson of the Federal Reserve and the volume of impending interest rate reductions.
Additionally, he highlighted political ambiguities concerning Washington’s posture towards Iran and Greenland, alongside the looming possibility of a U.S. government shutdown. “There are numerous storm clouds gathering in the background,” he asserted.
During the session, the Dow Jones Industrial Average eked out a slight gain of 55.96 points, or 0.11%, finishing at 49,071.56. The S&P 500 concluded the day at 6,969.01, down 9.02 points, or 0.13%, despite recovering from earlier lows.
The Nasdaq Composite faced a more significant decline, closing at 23,685.12, a drop of 172.33 points, or 0.72%, despite reducing losses in the latter half of trading.
Software stocks were particularly beleaguered, with Salesforce down 6%, Oracle decreasing by 2.2%, and Adobe declining by 2.6%. Additionally, cloud security firm Datadog saw an 8.8% decrease.
Concerns persist that AI could potentially disrupt business models for various software companies. “The fear is that AI may replace some of their services,” noted Jay Hatfield, CEO and CIO of Infrastructure Capital Advisors in New York. “The actual reality is somewhat inconsequential; these stocks are facing substantial pressure.”
In late trading, shares of Apple Inc exhibited volatility, gaining less than 1% following a report that surpassed quarterly revenue projections, buoyed by a remarkable rebound in the Chinese market.
CEO Tim Cook remarked to Reuters that demand for the latest iPhone has been “staggering.” Meanwhile, Tesla shares dipped 3.5% after the electric vehicle manufacturer proposed plans to more than double its capital expenditures.
Among the 11 major sectors within the S&P 500, technology lagged the most, declining 1.9%. Conversely, communications services surged by 2.9%, largely driven by a 10.4% increase in Meta, the parent company of Facebook. Notably, Meta coupled an optimistic revenue forecast with a 73% hike in its capital expenditure budget for the year.
In other positive developments, technology stalwart IBM saw its shares rise by 5% after its fourth-quarter earnings surpassed expectations. The energy index climbed 1% in tandem with soaring oil prices, as Brent crude futures approached a six-month peak amidst fears of a potential U.S. military intervention in Iran.
Additionally, in the wake of notable earnings reports, Caterpillar shares ascended 3.4% following a profit increase, while Mastercard rose 4.3% after exceeding Wall Street profit forecasts for the fourth quarter, despite announcing plans to lay off around 4% of its global workforce to reallocate investments.
Defense contractor Lockheed Martin shares surged 4% following an earnings forecast that exceeded Wall Street expectations for 2026.
Southwest Airlines saw shares soar by 18.7% after forecasting a stronger-than-anticipated annual profit, positioning itself as the foremost percentage gainer within the S&P 500.
In contrast, shares of rare-earth miners experienced declines following reports of potential shifts in pricing policies under the Trump administration. Companies such as USA Rare Earth, MP Materials, Critical Metals, and United States Antimony faced significant setbacks.
On the NYSE, advancing issues outnumbered decliners by a ratio of 1.19-to-1, with 611 reaching new highs and 176 hitting new lows. Conversely, the Nasdaq recorded 2,067 stocks rising against 2,746 that fell, translating to a 1.33-to-1 ratio favoring declining issues.
The S&P 500 recorded 51 new 52-week highs and 20 new lows, with U.S. exchanges witnessing a robust turnover of 23.36 billion shares, surpassing the 20-day moving average of 18.83 billion.
Source link: M.economictimes.com.
