Selloff Deepens in Early Afternoon as Intel Falls About 30 Percent and Oil Jumps After Tanker Attack
Wall Street fell further on Friday afternoon as the selloff in technology shares deepened, while oil prices rose after a tanker was attacked in the Strait of Hormuz.
The Nasdaq Composite fell 3.1 percent in early afternoon trading, while the Dow Jones Industrial Average dropped 1 percent and the S&P 500 fell 1.9 percent, Investor’s Business Daily reported. CNN reported similar moves, with the Nasdaq down roughly 3 percent, the S&P 500 down 1.8 percent and the Dow down 0.9 percent. The Russell 2000 index of smaller companies fell 2 percent, after rising 1.01 percent at the open. The figures were intraday readings, and the final closing levels will differ.
The losses were larger than at late morning. Yahoo Finance snapshots around 11:20 a.m. ET had shown the Nasdaq down 2.32 percent at 25,578.17, the S&P 500 down 1.45 percent at 7,608.08 and the Dow down 0.63 percent at 52,013.60. The session had opened lower after earnings reports from Amazon and Intel late Thursday renewed questions about the cost of building artificial intelligence systems. The three major indexes had already closed lower on Thursday, when the Dow finished at 52,342.56, down 0.25 percent, the S&P 500 finished at 7,720.39, down 0.30 percent, and the Nasdaq finished at 26,184.72, down 1.38 percent.
The concern at the center of the selling is straightforward. Large technology companies are spending hundreds of billions of dollars to build data centers and buy the chips and power those centers need. That spending has turned the cash flow of some of the largest companies negative, and investors are asking when the spending will produce matching profits. Alphabet, the parent company of Google, fell 12.6 percent on Thursday after its earnings report, erasing more than 500 billion dollars in market value, and fell another 1.5 percent on Friday, CNN reported.
Intel led the decline on Friday. Its shares plunged about 30 percent, CNN reported, after trading down 28.03 percent at 66.26 dollars around 11:20 a.m. ET. The company forecast fourth quarter revenue of 15 billion to 16 billion dollars and adjusted earnings of 25 cents a share, below Wall Street expectations of about 17 billion dollars in revenue and 44 cents a share. Intel reported third quarter adjusted earnings of 52 cents a share on sales of 16.51 billion dollars, above the expectations reported by Investor’s Business Daily, but investors focused on the outlook. The company cited weak demand for personal computers, manufacturing bottlenecks and a shortage of memory chips, Reuters reported, and warned that it would burn cash this year. Intel also said an explosion at a factory in Israel caused a two week shutdown and would cost about 600 million dollars in lost revenue over two quarters, Reuters reported. The Associated Press reported that the drop put Intel near its worst one day decline since 1974.
Amazon shares fell about 2 percent in afternoon trading, CNN reported, after falling about 7 percent before the market opened. Amazon had recovered most of the loss by late morning, trading down 1.03 percent at 241.27 dollars around 11:20 a.m. ET, before slipping back to 238.71 dollars, down 2.08 percent, in early afternoon. Amazon reported third quarter earnings of 1.89 dollars a share, below the estimate of 1.97 dollars, and revenue of 201.9 billion dollars, below the estimate of about 202.2 billion dollars, Investor’s Business Daily reported. The company reported negative free cash flow of 42.4 billion dollars over the past 12 months and said it expected to spend about 220 billion dollars on capital projects in 2026, mostly on data centers for artificial intelligence. Sales at Amazon Web Services, its cloud computing business, rose 39 percent to 46 billion dollars, the Associated Press reported, the fastest growth for that business in about five years.
The selling spread across chipmakers and other technology shares. An index of semiconductor stocks fell nearly 8 percent, Investor’s Business Daily reported. Advanced Micro Devices fell more than 10 percent in morning trading, and Nvidia fell 4.6 percent, CNN reported. Reddit fell 25 percent, Investor’s Business Daily reported, even though its earnings of 1.40 dollars a share and revenue of 895 million dollars beat expectations, after the company reported a decline in traffic referred from Google search and said it planned to require users to log in to use its platform.
Investors moved money into parts of the market seen as less exposed to technology spending. Consumer staples and health care shares gained, and the 10 year Treasury yield fell 5 basis points to 4.95 percent, Investor’s Business Daily reported, as investors bought government bonds. Regeneron Pharmaceuticals rose more than 11 percent after reporting strong earnings, and Amgen and Merck each rose nearly 3 percent in early trading, Investor’s Business Daily reported.
Oil added a second source of pressure. West Texas Intermediate crude futures rose nearly 3 percent to about 104.75 dollars a barrel in early afternoon trading, Investor’s Business Daily reported, and Brent crude traded above 113 dollars a barrel on Friday, Dow Jones Newswires reported. The Strait of Hormuz is the narrow waterway through which a large share of the world’s traded oil passes, so any threat to shipping there tends to push prices higher on fears of disrupted supply.
On Friday, the United Kingdom Maritime Trade Operations said a tanker passing through the strait had been hit by explosive devices attached to its hull by a small boat, causing a fire in the engine room that temporarily disabled the vessel, Reuters reported. It was not immediately clear who was behind the attack. The attack followed claims by Yemen’s Houthi militants on Thursday that they had struck several targets in Saudi Arabia, including the Ras Tanura and Rabigh refineries and a Saudi Aramco production facility in Abqaiq, Reuters reported. Qatari mediators returned to Tehran on Friday as part of efforts to reach an agreement between the United States and Iran, Reuters reported, citing an official briefed on the talks.
Energy shares held their gains. ExxonMobil and Chevron each rose 1 to 2 percent on Friday, Investor’s Business Daily reported, after both companies reported quarterly profits above expectations. ExxonMobil reported adjusted earnings of 4.23 dollars a share and Chevron reported adjusted earnings of 5.28 dollars a share, Reuters reported, helped by strong earnings from refining fuel as war disrupted energy markets and pushed gasoline and diesel prices higher.
A separate disruption hit cryptocurrency markets. Bitcoin fell to about 77,200 dollars, Investor’s Business Daily reported, after Binance, a cryptocurrency exchange, said hackers had taken about 6.3 billion dollars in digital coins and the exchange temporarily suspended withdrawals. Bitcoin had fallen to about 76,400 dollars earlier in the session, CoinDesk reported, and more than 1.5 billion dollars in leveraged cryptocurrency bets were closed out. Analytics firms TRM Labs and Elliptic attributed the attack to hackers linked to North Korea, CoinDesk reported. Binance said it would cover the losses.
Analysts differed on what the day meant for the broader market. Neil Wilson, a strategist at Saxo Markets, said in a note carried by CNN that investors wanted to see returns from artificial intelligence spending, not only more spending. Paul Stanley, a managing director at Arca, said in a note carried by CNN that the artificial intelligence trade was down but not out, and that pullbacks had happened before. Friday was the final trading day of October, and the closing figures, when they arrive, will show how much of the afternoon decline held until the end of the session.
