A Day After the Nasdaq Fell 2.6 Percent, Markets Await Next Week’s Tests
U.S. stocks headed into Friday carrying the shock of Thursday’s technology sell-off. Index futures were mixed in early trading.
The Nasdaq composite fell 2.6% on Thursday, its biggest one-day drop since June. The S&P 500 lost 1.21%, its steepest decline since July, while the Dow Jones Industrial Average edged higher.
Nvidia fell 4.4%, Alphabet lost 3.2% and AMD dropped 8.1%. Questions about whether the enormous spending on artificial intelligence will turn into actual profits weighed on share prices again.
Money moved out of stocks and into bonds. The yield on the 10-year Treasury note fell 0.185 percentage points on Thursday to 4.961%. When yields fall, bond prices rise. Homebuilders, banks and real estate investment trusts held up relatively well on hopes that borrowing costs would ease.
For the week, the S&P 500 was on track to finish nearly flat, the Nasdaq down 0.5% and the Dow up 1.7%.
Friday’s data include the preliminary October purchasing managers’ index and the final reading of the University of Michigan consumer sentiment survey. The final sentiment reading came in at 48.0, above the preliminary reading of 46.3. Weekly jobless claims reported Thursday came in at 194,000, the fewest since July. The labor market looks solid even as consumers feel gloomy.
The real tests are crowded into next week. The Federal Reserve meets Tuesday and Wednesday to set interest rates. Futures markets put the probability of a hold at about 90%. Attention has shifted to December, when markets are pricing in a roughly 80% chance of a rate increase.
Earnings reports will also pour in. Alphabet and Microsoft report Wednesday, Amazon and Intel on Thursday and Apple the following Monday. Eli Lilly, Exxon, Chevron and Caterpillar also report next week.
Walter Todd of Greenwood Capital said the key question is whether Fed Chair Kevin Warsh offers any hint about December at his press conference. Markets expect an increase, he said, and what matters is whether the chair says anything that confirms that thinking.